Global MVNO market surpasses 600 in Q2 2010

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New research published by Wireless Intelligence reveals that the number of active Mobile Virtual Network Operators (MVNOs) now exceeds 600 globally. The research is drawn from the newly launched Wireless Intelligence MVNO Tracking Tool which monitors the deployment of MVNOs across the globe, as well as operator-owned brands (which currently number 162).

MVNOs provide a cellular service through an agreement with a Mobile Network Operator (MNO) to purchase wholesale network access but do not have their own licensed spectrum or own all of the infrastructure required to provide a cellular service. In contrast, operator-owned brands are fully controlled by a parent MNO and marketed independently as they are often based on partnerships with well-known brand owners with no direct telecoms background – e.g. brands from the media/entertainment and retail sectors.

The Wireless Intelligence research found that 76 MVNOs commercially launched during 2009 (with a further 35 so far in 2010) and, at the current growth rate, the number of MVNOs will surpass the number of MNOs by mid 2013. Additionally, 14 operator-owned brands were launched in 2009 (with a further 5 so far this year) as operators increasingly look for new ways to target subscribers in specific market segments that they are keen to develop. One of the pioneers of this market segmentation approach is German operator E-Plus (KPN), which currently utilises 15 different brands (e.g. Base, blau and simyo) to target different market segments via flat-rate voice/text plans, low-cost prepaid packages or international calling offers. A similar approach has been implemented by Turkish operator Avea (Turk Telecom), which in the last year has launched a number of offerings branded after football clubs, occupational organisations and municipal bodies. Avea reported that these brands reached a combined 370,000 connections in Q1 2010 against a background of an overall shrinking Turkish cellular market. Meanwhile in the UK, O2 (Telefonica) has experimented with its social media focused ‘giffgaff’ prepaid brand (marketed as an independent offering despite O2’s ownership) but prior to a recent major new marketing push it had reportedly attracted only 3,000 connections. However, as growth slows in mature cellular markets, deeper consumer segmentation is expected to be an increasingly common approach in attempting to seek out additional revenues.

In addition to listing full details of the MVNOs, the new Wireless Intelligence MVNO Tracking Tool also classifies MVNOs by category, depending upon their primary market segment. Eight categories were identified: Business, Discount, M2M (Machine-to-Machine), Media/Entertainment, Migrant, Retail, Roaming and Telecom. Discount MVNOs – which primarily offer a low-cost prepaid service – represented 28% of the total number of MVNOs identified. This was followed by the Telecom MVNOs – whose offerings form part of a range of telecom services such as fixed-line phone and broadband Internet – on 19%. The Retail (13%), Migrant (11%), Media/Entertainment (10%), Business (9%) and Roaming (8%) categories are all fairly closely matched in terms of numbers. The smallest category identified was M2M with 2%.

In Western Europe, Germany alone has 103 MVNOs, far ahead of the next highest markets of Netherlands (42), Denmark (36), France (29), United Kingdom (29), Spain (27), Belgium (23) and Norway (19). Western Europe is also home to 110 of the 162 operator-owned brands. However, despite being the home of over one hundred MVNOs, the German market is dominated by a handful of large MVNO Groups such as freenet and Drillisch Telecom. As of Q1 2010, freenet Group alone accounted for 17.2 million connections or 16% of the German market. The proliferation of MVNOs in Germany has developed partly in response to the market segmentation approach adopted by E-Plus together with their keenness to attract MVNOs to their network. In addition to 15 brands of its own, E-Plus hosts 38 MVNOs – over a third of the total number of MVNOs in the country. E-Plus’ approach prompted the other German operators to follow suit in launching their own operator-owned brands and reach MVNO agreements and is a major factor in Germany having the second-lowest ARPU in Western Europe.

In the United States – home to 61 MVNOs – America Movil’s Tracfone is by far the largest MVNO Group operating through several sub-brands including TracFone Wireless, NET10, SafeLink Wireless and Straight Talk. Tracfone has MVNO agreements with multiple MNOs to provide nationwide coverage and, as of Q1 2010, the group had 15.4 million connections – equivalent to a market share of 5%. TracFone added 1 million connections in Q1 2010 and 3.7 million in the last 12 months (an increase of 31%) despite fierce completion in the US prepaid market from the likes of Sprint’s Boost Mobile and Virgin Mobile (since its acquisition by Sprint in Q4 2009) brands and prepaid specialists MetroPCS and Leap Wireless. Much of Tracfone’s recent success has been attributed to its Straight Talk ‘unlimited’ offering that is available nationwide via WalMart stores and hosted exclusively on Verizon’s network. Meanwhile, in the UK the largest MVNO is Virgin Mobile (Virgin Media) with 3.1 million connections, a market share of 4%.

Several recent market developments have highlighted the potential growth that could be achieved through the MVNO business model. For instance, Latin America currently only counts a handful of MVNOs but the recent publication of draft MVNO regulations by the Brazilian regulator ANATEL has increased the prospect of MVNO launches in Brazil – as well as promoting expectations of an expansion of the number of MVNOs in other Latin American markets such as Argentina and Ecuador. The situation is similar in India where regulation currently prohibits the operation of MVNOs, which pushed Virgin Mobile into entering the market in 2008 through a brand partnership with Tata Teleservices. Meanwhile just this week Tata launched its second brand partnership with retailer Future Group called T24.

Furthermore, last year witnessed the first entry of MVNOs in the Middle East as four MVNOs launched in Oman including FRiENDi Mobile (as well as its associate Halifoni), Renna (Majan Telecommunications) and Mazoon Mobile. FRiENDi Mobile reported that it reached the 150,000 connections milestone in less than a year while Renna completed its first year of operations with 130,000 connections. Oman Mobile (Omantel) reported that in Q1 2010 57% of its net additions in the last 12 months came from its new MVNO partners. Just this week FRiENDi Mobile launched in its second market, Jordan, making the country the second Middle Eastern market to see the launch of MVNOs. Also this week, Israel awarded its first MVNO licence to Telecom 365 – owned by retail group Hamashbir – that plans to launch next year.

Over half of the 72 MVNOs in Asia Pacific are currently found in Australia. However, last year witnessed the launch of four new MVNOs in both New Zealand and Thailand, while two new MVNOs were launched in Malaysia. In particular, Tune Talk which launched in Malaysia has seen considerable success with its discount prepaid approach and this month reported that it had reached the 1 million connections milestone less than a year after launch. In contrast, the African continent remains largely devoid of MVNOs, with Cameroon’s Yemba the only MVNO of note outside of South Africa. Kirene Mobile in Senegal initially positioned itself as an MVNO but the local regulator, ARTP, later ruled it was a brand of Orange.

Jon Groves, Analyst, Wireless Intelligence:

MVNOs have long been touted to be the next big growth area in the mobile industry but following some disappointing initial results and the failure of several high profile players (e.g. Disney Mobile and Amp’d Mobile in the US and easyMobile in the UK) early enthusiasm has naturally receeded. Ad-funded models were also trialled by the likes of Blyk in the UK but failed to establish a strong market foothold. However, with growth slowing in many cellular markets, attention has recently returned to the MVNO business model and some regulators – particular those that missed the initial phase of MVNO expansion – have recently implemented or are considering measures to allow the entry of MVNOs to encourage more competition. Western Europe remains the predominant region for MVNOs with 357 or 59% of the 602 MVNOs identified, while North America and Asia Pacific have 72 each (12%) and Eastern Europe 34 (6%). In contrast, the Americas, Middle East and Africa still only have a handful of MVNOs due to a combination of regulatory restrictions, a lack of spectrum availability and operator fears of cannibalising their existing customer bases. However, recent signs point to changing attitudes to MVNOs among regulators and operators in these regions that should encourage their expansion. Additionally, the growth of embedded devices is expected to spur a rapid rise in the number of dedicated M2M MVNO operators.

MVNO market size by region and category, Q2 2010
Source: Wireless Intelligence