Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Over the last few years, Mobile Virtual Network Operators (MVNOs) in Latin America have been yearning for a piece of the lucrative telecommunication service market in the region. The model is quite simple, offer mobile services both for telephony and data, as well as cell phones, under a private brand while using another company’s network. Since this is transparent to the consumer, it seems as if the MVNO is its own mobile operator working over its own wireless network.
It would appear to be the perfect deal, but there are a number of challenges, and success depends greatly on how the operators address these challenges, since no matter what, they face fierce competition from incumbents and traditional mobile operators that are, in many cases, very commanding and influential.
Benchmarking against other regions in the world reveals many valuable lessons.
The first “must” is to have a solid and convincing value proposition, and furthermore, the ability to fulfill it. In a sphere where conventional wireless carriers rule, differentiated data products and niche strategies are compulsory.
Providing differentiated data products is a key part of the MVNO value proposition in terms of not only plans and prices but also multiple and differentiated selling points, purchasing choices, customized applications and last but not least, device differentiation.
Offering state-of-the-art devices is frequently costly for MVNOs, resulting in higher cellphone prices than those of traditional mobile operators and therefore, no value to the end user. Introducing cell phones which are not the same as those being offered by the traditional mobile operators would instead provide differentiation and even add to the value proposition.
Consider this, in light of the next big challenge: market segmentation. There is nothing wrong with being a niche player. Choosing a particular target market and approaching it with the correct combination of products and services may mean the difference between success and collapse. In this way, MVNOs avoid competing with all mobile operators and focus on narrow markets, leveraging their capabilities.
Furthermore, besides the over competitive B2C approach, MVNOs ought to make a special effort in the B2B segment and particularly with machine-to-machine (M2M) applications.
With mobile penetration rates of more than 100% in nearly all Latin American countries, the region is indisputably a mature market for basic voice and messaging services. Targeting M2M applications to the right verticals could be one key to success since it provides a great amount of value to clients and could mean higher profit margins for the MVNO.
A niche player can grow capacity and scale around a core group of similar users, either B2C or B2B. As Mobile Virtual Network Operators build on their capabilities with differentiated services and content, they will achieve customer loyalty and higher returns without entering into price wars with traditional mobile operators, thus proving the MVNO model can be not just feasible but successful.
Gina Sanchez is ICT Industry Analyst at Frost & Sullivan
