Among the key challenges for launching mobile virtual network operators (MVNOs) across Latin America are the negotiations between MVNOs and mobile network operators (MNOs) and the time-to-market. Several countries in the region have already moved from being potential markets to actual markets. Nevertheless, MVNO expansion requires resolving key issues such as having regulations that allow companies to deploy services in a reasonable time frame.
This is the number one concern among companies that aim to launch operations in Brazil, which is the only large Latam country that does not have an MVNO yet. There are currently MVNOs in Mexico, Colombia, Costa Rica, Ecuador, Argentina, Chile and Bolivia.
In addition, the negotiation process between MNOs and candidates for MVNOs can be lengthy and difficult. “In a three party partner-relationship, boundaries and follow-up become crucial for securing a great costumer experience from a technical standpoint,” noted Sebastian Haedo, project leader at FullMovil, during this week’s MVNO Industry Summit Latam (check all stories).
“Negotiation is the most challenging dimension, not because MNOs do not want an MVNO, but because of wholesale cost and pricing. And this is not only in Brazil but worldwide,” said Jeffery Buckwalter, senior vice president for business development at VMLA. Virgin Mobile announced the launch of MVNOs in Colombia and Brazil over the next 18 months.
Daniele Tricarico, a senior analyst at Informa Telecoms & Media, summarized the main challenges in deploying MVNOs in the region as “knowledge problems.” As he explained, telecom operators, which account for about 80% of MVNO launches in Latin America, should not look at MVNOs as competitors.
“There is the idea that MVNOs are low cost, but in reality, they are interested in costumers that can add value. So they give an MNO the chance to add costumers with no acquisition costs, helping MNOs to improve profitability and increase Ebitda margin,” Tricarico said.
Eduardo Resende, TIM Brazil’s wholesale and partnership strategist, advised MNOs to search for MVNOs that complement their strategies and set up a long term plan. TIM has a business area focused on MVNOs, and it is the only MNO in Brazil which has contracts: Porto Seguro, Datora and Sisteer.
Adding to this, Victor Czarnobay, Vivo’s wholesale market director, argued that in Brazil’s very competitive telecom market, MVNOs are critical for increasing MNOs’ leadership. “They are part of the game to gain and lead in the market,” he said.
Vivo, which belongs to the Spanish-owned Telefónica, set up an MVNO unit, though it has no agreement yet. “We are preparing ourselves. We have dedicated people focused on understanding the MVNO market, but we need to have more than just a strategic view, we need to know how to put it into practice,” Czarnobay said.
In other countries, however, Telefónica’s Movistar has a number of MVNO contracts, including with Virgin Mobile Latin America.
Price regulation
The negotiating task increases when it comes to data pricing. MVNOs, such as Virgin Mobile, have already noted that their differentiation is in data services, once voice becomes a commodity. However, getting data pricing right remains a challenge.
Pricing has been a main focus of regulatory agencies, though stakeholders believe agencies should be concerned about the time-to-market as well. “Countries’ regulations should be about much more than pricing. They should help MVNOs be deployed in a reasonable time frame because when the MVNO can begin operating is more important than price,” said Fernando Schulhof, a lawyer specializing in telecommunications and a Network Adviser partner.
During a regulatory panel discussion, Schulhof said that the whole process takes too long in Brazil, citing companies that secured licenses in 2010 but have not launched yet. From the regulator’s side, Leandro Alves Carneiro, who is responsible for mobile services regulation management at Brazil’s Anatel, said that the agency has created a scenario for MVNO development.
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