Mobile Virtual Network Operators (MVNO's) have sprung up in a number of different countries recently with more or less success. In Germany for example the recent surge of MVNO activity has triggered a landslide in prices for voice calls.
The German mobile landscape 18 months ago: Four mobile network operators, two big and two small, fight for customers mainly by subsidizing new mobile phones and less by offering competitive voice minutes. Most people were on postpaid contracts with a basic charge of at least 10 euros a month. 50 included minutes to fixed line and the own network was available for around an additional 10 euros. Prices for voice voice minutes not included in the package were ranging from anywhere between 30 and 70 cents depending on the destination of the call. Prepaid was seen mainly as a good choice for kids and voice minutes were ranging from 60-80 cents a minute.
The German mobile landscape today: And then suddenly everything started to change rapidly. One of the smaller network operators (ePlus, KPN is the mother company) decided to get very aggressive to gain market share and started its own low price voice minute "no frills" MVNO. A couple of months later, several independent MVNOs joined the game. Again, only a few months later, all but one of the other network operators (Vodafone) reacted and also made contracts with new MVNOs. The result: Today, if you want to make cheap phone calls, a Prepaid SIM is the choice and it has become difficult to count the number of MVNO's. There are certainly more then a dozen by now.
Prices are at 14 cents a minute to ALL networks (including other mobile networks) and around 4-5 cents a minute to mobiles with the same MVNO. There is no basic charge and some MVNO's have no expiry date for the balance. Compare that to 20 Euros a month postpaid for 50 minutes and 70 cents per minute afterwards. The choice is easy. The only thing you don't get from an MVNO is a subsidized handset. Not that I could care less which all the software modifications operators demand these days for the mobiles they bundle with postpaid contracts.
So why has this been working so well? I think it is mainly because one of the incumbent operators has decided to offer very competitive wholesales prices. Another factor which as worked quite well in the market is the fact that a lot of MVNOs are competing with each other by now so they are much more willing to reduce their margins. So MVNOs are not a guarantee for cheap prices just because they are there as can be seen in other countries where it hasn't worked so well up to now.
My wish for the next step: Today, MVNOs in Germany concentrate on voice minutes only. GPRS/UMTS is not on their radar screen yet. You can get it from them, too, but prices are not very attractive. So here's a way to differentiate yourself from operators: Offer a prepaid data bundle that allows GPRS/UMTS roaming to other countries for a reasonable price. I know this not easy to do in todays environment as MVNO's are still dependent on the wholesale prices operators grant them. But then on the other hand nobody would have guessed the landslide success of mobile voice MVNOs in Germany just two years ago. Let's see, maybe one day I might see my dream fulfilled and I can use a single mobile again for voice calls and for accessing the mobile Internet anywhere I go, even in other countries.
Very good market summary about Germany. Thanks Martin.
We had MVNO rush in Finland couple of years ago. Competition was fierce and prices went down. Now the biggest MVNO is bought by 2nd biggest mobile network operator and other MVNOs have disappeared (Actually I don't know reason for that). Anyway operator margins are back to very heathy level. At the moment it seems that it's better to be a shareholder than consumer, but who know for how long...
Posted by: Jouni Juntunen | October 31, 2006 at 10:00 AM