MVNOs: Evaluating their impact on market growth and profitability

PUBLISHED:

July 2006 (49 Pages)

AUTHOR:

Devine Kofiloto, Informa Telecoms and Media

CONTRIBUTING AUTHORS
Thomas Wehmeier, Senior Research Analyst
Dario Talmesio, Senior Research Analyst
Tammy Parker, Analyst
Kester Mann, Senior Research Analyst
Abigail Browne, Editor

REPORT STAFF
Olivia Gibney, Managing Editor
Marta Almansa, Production Editor
Faiza Carter, Production Manager
Mike Woolfrey, Group Portfolio Director, Technology

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OVERVIEW

This study examines the disruptive impact of MVNOs within six markets in terms of subscription developments, pricing and profitability trends. This study also examines the factors that are stimulating MVNO development.

Case studies assess MVNO activity in:

Denmark
Finland
Germany
UK
Poland
USA

Each country case study examines:

• Factors that stimulated MVNO development and their implications
• The impact of MVNO, as measurable by the following indicators:
  • Subscription trends/market share of MVNOs vs MNOs
  • Impact on pre-paid vs post-paid
  • Price trends for voice minutes across all operators
  • ARPU trends
  • Profitability trends
  • MOU trends
• Strategies of the major MVNOs
• Likely response of incumbent operators

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TABLE OF CONTENTS

Chapter 1 – Introduction

• Pricing methods for MVNO network access
• Categorisation of MVNO markets
  • The three stages of the MVNO market lifecycle
  • Mature
  • Emerging
  • Undeveloped
• Stimuli for the launch of MVNOs
  • The open-door strategy of the ‘challenger’ network operator
• The role of the European Union in facilitating MVNO access in EU markets
• Incumbent network operators’ response to MVNO launches

Chapter 2 – Denmark

• The MVNO effect: rejuvenation of a stagnant market?
  • Subscription growth of Tele2 and debitel Denmark
• MVNOs kick-off fierce level of price competition
• As prices dropped ARPU soon followed
  • TDC ARPU development and Telmore subscription growth
• Fall in profitability heralds major structural change in the market
• Consolidation leads to calmer waters

Chapter 3 – Finland

• Mobile number portability in Finland
  • Market impact
• Price erosion in the Finnish market
• Weighted blended ARPU decline in the Finnish market post-MNP
• TeliaSonera hit by falling profitability
• Price drops stimulate usage in Finland
  • Post-consolidation

Chapter 4 – Germany

• Selected German discount MVNO tariff structures
• Subscriptions and market share of selected MVNOs (end-1Q06)
• Market share of German MVNOs, end 1Q06
• Market impact on tariffs and KPIs
• ARPU development in Germany, 1Q06 versus 1Q05
• Average blended churn (%) of German mobile network operators, 1Q05–1Q06
• Competition between discount providers is still predominantly on price
• Market visibility is key to capturing a share of the discount segment
• What types of customers are the no-frills operators attracting?

Chapter 5 – UK

• MVNO and wholesale businesses steadily increase their market share
  • UK subscribers, MNOs and MVNOs
  • Selected UK MVNOs
• Growing competition
  • Virgin Mobile UK ARPU and SAC, 2004 and 2005
• Lowering prepaid tariffs
  • Average UK mobile unit price indices
• Operators expand their wholesale strategy

Chapter 6 – North America

• MVNOs raise the stakes with high-end offerings
• Virgin Mobile leads the way with accessible prepaid plans
• Factors stimulating MVNO growth
• Low-cost MVNOs boost prepaid market share
  • Selected US MVNOs and their target markets
  • Increase in prepaid share in the USA
• US ARPU analysis
  • Voice versus data ARPU development in the USA, 1Q05–1Q06
  • Data ARPU of four largest US operators, 1Q05–1Q06
• Differentiation goes beyond pricing as the MVNO market matures
• Tecnology drivers
• Distribution is key
• Failure points
• In-house brands

Chapter 7 – Poland

• Network operators launch sub-brands to pre-empt MVNOs
  • Polish network operators’ ARPU v subscriptions

Chapter 8 – Conclusion

• Distribution is key
• MVNO business model evolves as MVNO market matures
  • Selected MVNO acquisitions by network operators
• What is the impact of MVNOs on the network operators’ business models?
• Impact on profitability and investment
• MVNO market share

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