Talk is cheap
Opportunities for Mobile Virtual Network Operators (MVNOs) in Austria and Eastern Europe could not be better – but they must choose their network providers wisely.
A recent study by Roland Berger Strategy Consultants Austria reveals that mobile virtual network operators in Austria and Central and Eastern Europe are performing under their potential – in large part due to the maturity of the market. Taking Austria as an example, Dr. Julian Pötzl of the consultancy's Vienna office notes: "Virtual network operators could achieve a market share of around 20 to 25% - in reality, however, the four local operators of this kind only manage to reach half that."
MVNOs provide mobile telephone services by buying into existing infrastructure, i.e. parts of a radio frequency spectrum. In practice, this translates into buying 'minutes' in bulk and passing these on to their customers at reduced rates. MVNOs are usually 'SIM card only' providers and don't offer hardware packages, which include phones at reduced rates coupled to long term contracts.
Thus, markets become attractive for MVNOs when an established mobile phone market exists that guarantees the existence of a wide range of telephone hardware, no longer coupled to existing network contracts. Research has shown that a market penetration of 70% and above is the ideal context for MVNO activity. The second step, then, is to partner with the right network provider.
Virgin Mobile, the first European MVNO, launched its operations in the UK in 1999, partnering with T-Mobile UK. Its strengths, Pötzl highlights, were its strong brand and wide retail structure: Mobile services were sold both through dedicated Virgin Mobile stores, as well as through the established Virgin Megastore music outlets. Today, Virgin mobile has 5 million customers representing a market share of 7%.
Looking at the Virgin Mobile example, the consultant highlights the factors that spell success in the MVNO market: "A potential operator must ideally have its own network, be able to quickly establish its brand in the market and have access to a nationwide retail structure."
A recent study by Roland Berger Strategy Consultants Austria reveals that mobile virtual network operators in Austria and Central and Eastern Europe are performing under their potential – in large part due to the maturity of the market. Taking Austria as an example, Dr. Julian Pötzl of the consultancy's Vienna office notes: "Virtual network operators could achieve a market share of around 20 to 25% - in reality, however, the four local operators of this kind only manage to reach half that."
MVNOs provide mobile telephone services by buying into existing infrastructure, i.e. parts of a radio frequency spectrum. In practice, this translates into buying 'minutes' in bulk and passing these on to their customers at reduced rates. MVNOs are usually 'SIM card only' providers and don't offer hardware packages, which include phones at reduced rates coupled to long term contracts.
Thus, markets become attractive for MVNOs when an established mobile phone market exists that guarantees the existence of a wide range of telephone hardware, no longer coupled to existing network contracts. Research has shown that a market penetration of 70% and above is the ideal context for MVNO activity. The second step, then, is to partner with the right network provider.
Virgin Mobile, the first European MVNO, launched its operations in the UK in 1999, partnering with T-Mobile UK. Its strengths, Pötzl highlights, were its strong brand and wide retail structure: Mobile services were sold both through dedicated Virgin Mobile stores, as well as through the established Virgin Megastore music outlets. Today, Virgin mobile has 5 million customers representing a market share of 7%.
Looking at the Virgin Mobile example, the consultant highlights the factors that spell success in the MVNO market: "A potential operator must ideally have its own network, be able to quickly establish its brand in the market and have access to a nationwide retail structure."
A look at Central and Eastern Europe
This is why MVNOs are interested in markets such as Hungary, the Czech Republic or Poland. For example, Hungary has a penetration rate of 98%, but there are still no providers on the market. "Here, there's dormant sales potential of about EUR 35 million for each operator. There are, however, various negotiations going on with network operators at the moment," says Julian Pötzl.
Southeastern European markets such as Romania, Bulgaria or Serbia have not yet reached this level of maturity. In Romania, for instance, mobile phone penetration has just barely reached 70%. "This means the market will become interesting for MVNOs this or next year. We're assuming sales potential of around EUR 30 million," explains Pötzl. Countries like the Ukraine still have a long way to go: The Ukraine currently has a market penetration rate of only 37% – however, this is rising rapidly. "Western European providers must not only observe traditional success factors when entering Central and Eastern European markets. It's also essential that they sign an agreement with an existing network operator. Local law does not necessarily force incumbents to provide network access to companies," Pötzl says, summarizing the situation in this region.
This is why MVNOs are interested in markets such as Hungary, the Czech Republic or Poland. For example, Hungary has a penetration rate of 98%, but there are still no providers on the market. "Here, there's dormant sales potential of about EUR 35 million for each operator. There are, however, various negotiations going on with network operators at the moment," says Julian Pötzl.
Southeastern European markets such as Romania, Bulgaria or Serbia have not yet reached this level of maturity. In Romania, for instance, mobile phone penetration has just barely reached 70%. "This means the market will become interesting for MVNOs this or next year. We're assuming sales potential of around EUR 30 million," explains Pötzl. Countries like the Ukraine still have a long way to go: The Ukraine currently has a market penetration rate of only 37% – however, this is rising rapidly. "Western European providers must not only observe traditional success factors when entering Central and Eastern European markets. It's also essential that they sign an agreement with an existing network operator. Local law does not necessarily force incumbents to provide network access to companies," Pötzl says, summarizing the situation in this region.
Compare and contrast
For established market Austria, the story is different, Pötzl underlines. Here MVNOs are falling short of their potential, despite the high degree of market penetration for mobile phones. This underperformance can be linked to the aggressive price wars between established providers, which make market entry for MVNOs unattractive. For instance, market leader "yesss!" and up-and-coming "bob" in particular are engaged in fierce competition. Competitors "Tele2 Champion" and "eety" have already fallen far behind. "It's clear that the subsidiaries of established network providers have greater growth potential. They have a clear advantage when it comes to negotiating network usage and other conditions," says Pötzl.
If you have questions regarding this, or any other story, please do not hesitate to contact us:
For established market Austria, the story is different, Pötzl underlines. Here MVNOs are falling short of their potential, despite the high degree of market penetration for mobile phones. This underperformance can be linked to the aggressive price wars between established providers, which make market entry for MVNOs unattractive. For instance, market leader "yesss!" and up-and-coming "bob" in particular are engaged in fierce competition. Competitors "Tele2 Champion" and "eety" have already fallen far behind. "It's clear that the subsidiaries of established network providers have greater growth potential. They have a clear advantage when it comes to negotiating network usage and other conditions," says Pötzl.
If you have questions regarding this, or any other story, please do not hesitate to contact us:
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