Expanding internationally, virtually

Metaratings
18 Jan 2012
00:00
Article

As featured on TM Forum’s the Insider Blog

I have always been an advocate of the Mobile Virtual Network Operator (MVNO) model. I have suggested on occasions, that the MVNO model is the perfect medium for utilities to establish their own Smart Grid, for big brands to extend services to their customers via their own network and even for OTT players to ensure they can guarantee delivery of digital content to their base.

This even extends to mobile or fixed line operators that might want to look at creating their own sub-brands as MVNOs to address particular sectors of their markets, such as small to medium enterprises (SMEs) that their existing consumer or corporate operations overlook.

For those operators that are offering global services to their key accounts, operating networks in every country is not an option, even for multinational players like Vodafone, so buying wholesale services in markets they have no presence in has become the norm. Presumably these wholesale arrangements have options built in for expansion into joint branding or even MVNO establishment, if the volumes warrant it.

For national operators in saturated markets that may not have the funds required for international acquisition and expansion, becoming an MVNO in other markets makes good sense. This is especially relevant where there may be a substantial population of their own nationals, e.g. foreign workers form the Philippines working in the Middle East, and where mobile payments and remittances are a big part of the service mix.

Now, it seems, comes another good reason for national operators to look at becoming MVNOs in overseas markets. The recent announcement that China Telecom, China’s largest fixed line operator, has signed an agreement with Everything Everywhere, the UK’s largest mobile network operator, is the first of what could become a flood of new MVNO operations worldwide. In the case of China Telecom, the agreement extends to mobile virtual network aggregator/enabler (MVNA/E) Transatel, that will enable it to supply services direct Chinese residents and visitors in the UK, starting in the first quarter of this year.

As Cesar Bachelet, Senior Analyst at Analysys Mason, pointed out, China Telecom will be entering a saturated market with a mobile penetration rate of nearly 128% as of September 2011, with just under 11 million of them existing MVNO subscribers. However, Chinese citizens in the UK, most of which have strong ties to China, represent a million potential customers for China Telecom’s mobile services.

Existing UK operators probably have no desire to produce collateral in any particular foreign languages, taking into account the potentially massive number of languages they would have to cater for. Sure, some offer cheap calls to particular destinations to attract foreigners, but China Telecom will not only provide support to customers in their mother tongue, it plans to offer a range of Chinese ‘infotainment’ services by the end of 2012.

When the service is established in the UK, China Telecom plans to launch similar services in other European countries, such as France, Germany and Italy, by the end of 2014.

As Analysys Mason points out, offering services overseas will not just enable China Telecom to gain new customers outside China, but could also encourage Chinese citizens returning from abroad to opt for their services, both fixed and mobile. By using Transatel as an intermediary, China Telecom has increased speed to market while reducing its initial outlay and minimizing the risk, thus making it possible to have a viable business case with a lower number of subscribers.

However, for other aspiring MVNO players with strong home infrastructures, and even China Telecom itself, there is always the option of managing billing and customer care from the home location and using the host network purely as the means of delivering services to their nationals abroad. That would surely be a lower cost option, making the low margin MVNO model more sustainable. What’s stopping other fixed line operators from getting into the mobile game this way as well?

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