1. MVNO 2.0
Warsaw 11th
September 2013

2. 2
Agenda
 Introduction to Smarter Mobile UK Limited
 MVNO 2.0?
 Revisit the “no frills” concept

3. 3
SMUK is a turnkey service provider of infrastructure and services to the
MVNO telecommunications industry globally.
 License Acquisition/Bid Support and Launch Consulting, Interim
Management,
 Sales and “Go to Market” strategy
 Radio Spectrum, numbering, interconnect and licence negotiations
 Managed procurement services including RFI/RFP preparation and full
tender/bid services to support vendor selection
 Comprehensive network planning including access, core and IT and
ccomplete Management of deployment activities including
acquisition, construction and installation services
 Financial Operations, Due Diligence
.
Introduction to SMUK

4. 4
Smarter Mobile formed in 2009 by a group of experienced Mobile
Executives who have worked with major Telco’s around the world
Background

5. 5
SMUK Highlights

6. 6
Industry knowledge
involved with MVNO deals on multiple levels in many countries:

7. 7
We all know that Growth in
MVNO’s is well established

8. 8
And continues to grow

9. 9
And are a significant segment
of the Mobile marketplace

10. 10
But we need to drive up MVNO
Valuation

11. 11
How?

12. 12
MNO cost base
The cost structure of an MNO is biased heavily
towards fixed costs. The main fixed cost elements
of the MNO are:
•Network operations and maintenance (typically
30% of all fixed costs)
•Sales (20%)
•Customer service and billing (15%)
•Marketing and communications (10-15%)
The main variable cost elements for the MNO are:
•Interconnect costs
•Customer acquisition
•Customer retention costs
Rule number 1 - Understand your Host MNO’s
business model

13. 13
MNO cost base
The cost structure of an MNO is biased heavily
towards fixed costs. The main fixed cost elements
of the MNO are:
•Network operations and maintenance (typically
30% of all fixed costs)
•Sales (20%)
•Customer service and billing (15%)
•Marketing and communications (10-15%)
The main variable cost elements for the MNO are:
•Interconnect costs
•Customer acquisition
•Customer retention costs
MVNO cost base
The cost structure of the typical MVNO is almost
completely the opposite of a facilities based
network operator. The main fixed cost elements
are relatively small and comprise:
•Customer care and billing
•Sales, marketing and communications
The variable cost proportions are dominated by
wholesale airtime costs as well as customer
acquisition.
Wholesale costs can often represent 50% to 60% of
a typical MVNO’s operating costs which
immediately limits profit margins.
It is therefore essential for the MVNO to develop
a business model that minimises the cost of
customer acquisition and retention as well as
fixed costs in order for the business model to be
commercially viable.
Rule number 2 - Understand your business model

14. 14
MNO cost base
The cost structure of an MNO is biased heavily
towards fixed costs. The main fixed cost elements
of the MNO are:
•Network operations and maintenance (typically
30% of all fixed costs)
•Sales (20%)
•Customer service and billing (15%)
•Marketing and communications (10-15%)
The main variable cost elements for the MNO are:
•Interconnect costs
•Customer acquisition
•Customer retention costs
MVNO cost base
The cost structure of the typical MVNO is almost
completely the opposite of a facilities based
network operator. The main fixed cost elements
are relatively small and comprise:
•Customer care and billing
•Sales, marketing and communications
The variable cost proportions are dominated by
wholesale airtime costs as well as customer
acquisition.
Wholesale costs can often represent 50% to 60% of
a typical MVNO’s operating costs which
immediately limits profit margins.
It is therefore essential for the MVNO to develop
a business model that minimises the cost of
customer acquisition and retention as well as
fixed costs in order for the business model to be
commercially viable.
Remember for a MVNO nothing
is for FREE!
It is a “margin” business
Remember for a MVNO nothing
is for FREE!
It is a “margin” business
Rule number 3

15. 15
 Introduction to Smarter Mobile UK Limited
 MVNO 2.0?
 Revisit the “no frills” concept
MVNO 2.0?

16. 16
The second generation of MVNOs
and mobile services ( 2.0)
MVNOs have established themselves firmly as the second group of
mobile service providers, with more than 250 in business worldwide.
Whereas the first generation of MVNOs (1.0) followed a strategy of cost
leadership, the second generation (2.0) are concentrating on
differentiation to address high ARPU market segments.
The first generation MVNOs implemented their strategies using lean
business structures and processes and the Internet as a cheap direct
sales channel. Pre-paid products dominated and the providers limited
their mobile services mainly to voice and messaging. The model for this
was the success of the budget airlines concept – and has led to the
term ’Low-Frills MVNOs’.

17. 17
A direct comparison of MVNO 1.0 vs. MVNO 2.0 business models
and strategies makes the differences between the first and second
generation MVNOs clear in that second generation MVNOs have
chosen a differentiation strategy, whereby the providers don’t limit
themselves to the three competitive parameters; brand, price and
distribution channels but with customer loyalty programs, customized
communication concepts (above & below the line), and even concept
stores
The differentiation of the user experience ensures that these MVNOs
will have a sustainable competitive advantage over the MNOs, who
are generally perceived by end consumers as being mass market
service resulting from a market approach of “One Size fits all" to a
vertical, segment-specific service offering.
The second generation of MVNOs
and mobile services ( 2.0)

18. 18
Although low-frills MVNOs are responsible for the massive fall in mobile
communication prices over recent years, they also take on a job which
the MNOs don’t or can’t fulfil: they provide mobile services to the lower
end of the market – profitably.
The market potential for low frill MVNOs is also believed to be limited as
the majority of the customers see the handset subsidies as a major
criterion for their purchase decision however it is worth revisiting the
original “no frills” business concept.
That is :
The evolution of budget airlines
The second generation of MVNOs
and mobile services ( 2.0)

19. 19
The Low Cost Airline model
 Introduction to Smarter Mobile UK Limited
 MVNO 2.0?
 Revisit the “no frills” concept

20. 20
What can Budget Airlines teach
us?

21. 21
What can Budget Airlines teach
us?

22. 22
What can Budget Airlines teach
us?

23. 23
What can Budget Airlines teach
us?
The vast majority of MNVO’s
have cut out the traditional
“middle man” adopted online
strategies or leveraged existing
sales channels such as
supermarkets etc

24. 24
What can Budget Airlines teach
us?

25. 25
What can Budget Airlines teach
us?
MNVO’s have adopted
paperless strategies with
automated sign up processes

26. 26
What can Budget Airlines teach
us?

27. 27
What can Budget Airlines teach
us?
By removing full service
customer care ( Call centres)
from their processes and
introduced “self care” it has
removed the opportunity for
complaints

28. 28
What can Budget Airlines teach
us?

29. 29
What can Budget Airlines teach
us?
MNVO’s are still dependant
upon the Host MNO network and
often suffer from the effects of
failures of the network beyond
their control

30. 30
What can Budget Airlines teach
us?

31. 31
What can Budget Airlines teach
us?
By focussing upon specific
deliverables MVNO can often
outperform the Host MNO’s

32. 32
What can Budget Airlines teach
us?

33. 33
What can Budget Airlines teach
us?
A weakness area, MNVOs do
not often exploit the cross selling
opportunities of the subscriber
base they have ( at great cost)
acquired

34. 34
What can Budget Airlines teach
us?

35. 35
What can Budget Airlines teach
us?
Multiple Host MVNO’s still in their
infancy, a lot of commercial and
technical barriers to over come

36. 36
What can Budget Airlines teach
us?

37. 37
What can Budget Airlines teach
us?
Early days but there is a growing
awareness of the need to control
your own customers to break the
dependency ( monopoly?) upon
a single Host MNO and obtain
the freedom to move your
wholesale business to a different
provider

38. 38
What can Budget Airlines teach
us?

39. 39
What can Budget Airlines teach
us?
growing awareness by the Host
MNO’s of the value of the MVNO
as sales channels and the
willingness to provide support in
the form of “Marketing Support”
etc

40. 40
What can Budget Airlines teach
us?

41. 41
What can Budget Airlines teach
us?
There is still areas beyond just ( ever) lower prices that MVNO
can exploit

42. 42
DIGITAL INNOVATION
EXAMPLE
HANDSETs – the Taboo subject!

43. 43
By utilising a ready made program to be made available as a
“white label” offering that will enable MVNO’s to offer their existing
users an easy method of converting old unwanted handsets into
“calling credit”.
This program will not only generate additional gross margins for
the MVNO but also has very emotive PR opportunities by
demonstrating that they have a program that will:
How does a handset recycling
program assist an MVNO?
Help to reduce the number of mobile phones
that end up in landfill.
Help provide affordable mobile phones to less
well off people in developing countries
Demonstrate old phones are being properly
and efficiently recycled in line with current
legislation.

44. 44
How does it work? –
Program can be initiated by the
MVNO by newsletter promoting the
new service driving subscribers to
the website or Subscribers find it by
normal browsing the site
“White label” functionality
Subscribers returned to MVNO
website

45. 45
Handset Recycling program
being launched with Family
Mobile Program will be initiated by newsletter
promoting the new service driving
subscribers to the website or Subs find it
by normal browsing the site

46. 46
Simple Process flow
By using the existing
“Family Mobile” home
page it enables Family
Mobile to launch the
service immediately and
get to market in weeks
Family Mobile have
created a dedicated
page to explain how
the process works

47. 47
recycle
Using “back end” processes
Here is the price we will give you for your old phone, check the details and if
you want to proceed tick the boxes and click on “recycle”

48. 48
recycle
When your envelope arrives, just pop your handset in the
preaddressed and paid envelope and return it to us. Upon
receipt and checking we will credit your mobile account with
value of your recycled phone . That’s it!
Once processes are completed

49. 49
The subscibers account is
credited with the “Retail” sales
amount When sales process complete and credit added to the subscriber account
it will show up in the subs balance etc.

50. 50
MVNO subscribers = 75,000
percentage with old handsets = 50% 37,500
percentage that take up Recycle offer = 10% 3,750
Average value of handset = £25
Credit applied to Subscriber
SIM card account = £25
"wholesale" cost to MVNO of Airtime calculated at average 55% £13.75
Gross margin to MVNO per
transaction = £11.25
number of sales per annum = 3,750 £42,188
How does this translate into a
business case for a MVNO?
As a MVNO works on a “wholesale” rate from the Host MNO there is the
opportunity to generate “gross margin” from the handset sale if converted to
“calling credit” as demonstrated below:

51. 51
What can Budget Airlines teach
us?

52. 52
•That a fast moving consumer market needs a fast response time;
• Customers don’t work on a 18 month time line, they want it now!
•Do what needed now or someone else with do it first!
•Idea on Monday , promotion on Friday
Differentiate customers by value

53. 53
Understand your Airtime
economics

54. 54
Remove the complexity
Improving margins
Reducing operating costs
Reducing churn
Increasing ARPU
Earning customer loyalty

55. 5555
MVNO’s are technically complex
…and can be very expensive to set up

56. 5656
We have gone a long way to remove that
Complexity … and start up cost…
 Already negotiated with Network
Operators on your behalf
 We already have a fully staffed and
experienced Customer Call Centres – in
the UK and the USA
 We’ve already created a billing platform
and connected it to the Network operators
 We can produce your Branded SIM packs
in weeks
 We provide a range of Simple and
straightforward tariff plans
 We have a generous Revenue Sharing plan
for you
…and can provide a full “Turn Key” service
X

57. 57
We understand the need to keep things simple….
Working with IKEA, one the worlds most well known
Brands, we developed a mobile service that reflected
their not only their Brand but their approach to their
customers, one of keeping things simple and straight
forward.
We have used that experience in creating our MVNO
product with the keynote of Simplicity and speed to
market

58. 58
The proposition
 Family mobile was created
to offer a low cost
affordable Mobile Phone
service to IKEA Family Card
holders
 Primarily SIM only offering
with the tariff plan kept as
low as possible
 Majoring on the benefits of
“shared” minutes via a
Family Budget offering
 Ease of use automatic top
up
 Integrated into back end
loyalty programme
 Giving IKEA direct marketing
opportunity to its
subscribers and creating
brand loyalty
…using a “self care” approach

59. 59
That aligns with the Brand
…..and keeps it simple! - WYSIWYG
…as well as reducing costly customer care issues

60. 60
Focusing on niche market segments, MVNO’s are challenged to design
new products and efficient delivery process. This means you need
integrated systems and services to rollout the business to the end
customer.
It may seem less painful to invent an original service, but it is often
harder to configure the best solution. Expanding and developing your
offering requires careful alignment with your overall business strategy.
Entering the MVNO market can be a huge risk without a cautious
planning of the required tools.
It is does not get any easier if you are a new MVNO, already running a
MVNO, or your MNO is planning to develop one.
A MVNO business is only as good as its
ability to create innovative marketing
… it still means you need to plan ahead

61. 61
OSS/BSS is your key player in this strategy in providing a simple, easy and
natural user experience with your newly created product/service packages.
By integrating the business process flow with your BSS environment, the
MVNO processes need to be completely optimized for managing the
critical customers' information and providing the best customer service.
No matter if you are established MVNO or a start-up, the present complex
challenges can be easily managed with the right partner.
An MVNO in today's fast moving market needs to look to a “Configure on-
demand”, business model with the right combination of tools appropriate
for successful execution of processes that will bring the right solution to
generate a mass of loyal customers while reducing OPEX.
Whatever the approach - flexible
OSS/BSS and billing platforms are
essential…

62. 62
MNO cost base
The cost structure of an MNO is biased heavily
towards fixed costs. The main fixed cost elements
of the MNO are:
•Network operations and maintenance (typically
30% of all fixed costs)
•Sales (20%)
•Customer service and billing (15%)
•Marketing and communications (10-15%)
The main variable cost elements for the MNO are:
•Interconnect costs
•Customer acquisition
•Customer retention costs
MVNO cost base
The cost structure of the typical MVNO is almost
completely the opposite of a facilities based
network operator. The main fixed cost elements
are relatively small and comprise:
•Customer care and billing
•Sales, marketing and communications
The variable cost proportions are dominated by
wholesale airtime costs as well as customer
acquisition.
Wholesale costs can often represent 50% to 60% of
a typical MVNO’s operating costs which
immediately limits profit margins.
It is therefore essential for the MVNO to develop
a business model that minimises the cost of
customer acquisition and retention as well as
fixed costs in order for the business model to be
commercially viable.
Remember for a MVNO nothing
is for FREE!
It is a “margin” business
Remember for a MVNO nothing
is for FREE!
It is a “margin” business
Rule number 3

63. 63
Questions?