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Summary

The success of the MVNO Latin America 2015 event held in Mexico City was an indication of the interest in developing innovative mobile offers in Mexico. It was clear that just offering cheaper voice and data resale isn’t a successful strategy. Niche offers, a deep knowledge of customers, strong relationships, integration with the core business, cost control, and evolution to new technologies and applications are the key issues when analyzing a successful MVNO business case.

MVNO market opportunities and new dynamics

MVNOs were fully launched in Mexico in 2014 and, although they had acquired less than 0.5% of the market after a year, there are big expectations in the market. MVNOs in Mexico have contributed to price reductions and consumer benefits that have resulted from the new competitive dynamics and telecoms reform. These topics were also discussed at the LTE Latin America 2015 event, in part due to the announcement that the 700MHz band would be awarded to a wholesaler operator, being mainly oriented to MVNO operators. The bid process has been a bit delayed, and is expected to be finally awarded in mid-2016. Possible new MVNO regulations are also being discussed.

Telefonica decided to support MVNOs in Mexico in 2014 and made several agreements with MVNOs, which shook up the market. In 2015, Movistar launched its own Tuenti sub-brand, and Telcel also started offering MVNOs (Alo sub-brand and hosting Axtel). During the event, several MVNOs thanked Telefonica for its move and Telefonica explained the importance of two key issues when it was analyzing and making a strategic decision about partnering with an MVNO:

  • The MVNO should be focused in a specific niche which it should know very well
  • Customer relationship should be the MVNO’s main differentiator (not price).

Some of the main conclusions of the event were that MVNOs would continue accounting for just a small part of the market. Nonetheless, Ovum forecasts that MVNOs will account around 4% of the Mexican market by 2019, and expects Mexico to be the largest MVNO market in the region within five years.

MVNO models are evolving and it was agreed that a cheaper voice reseller won’t be successful, considering that the MNO can always match pricing. For example, in Mexico, Virgin entered the market with a very competitive pricing, but Telcel matched the offer. Now Virgin is moving to bulk offers that include certain popular applications with zero rating with an automatic monthly recharge, following the same strategy that is being applied in Chile and Colombia.

Falabella Movil from Chile, which has 100,000 customers, explained how it moved from a prepaid model to a fixed monthly fee. It is now integrating its offer with a retail strategy: Its big bet is on IoT/wearables and customer real-time analytics. Falabella is also analyzing whether to start selling devices to acquire new customers. It clearly understands that it needs to have a differentiator and can’t compete as a telco.

Retailers are focusing on innovative offers. Ali Telecom, the Alibaba Group MVNO in China, offers its own low-cost smartphones with a proprietary operating system and free Wi-Fi (one hour per day) logging through its online shopping application. Despite its MVNO being a failure, the Disney MVNO shut down its operations in 2007, Disney has spent $1bn developing its “MagicBand” wearable which is integrated with the Disney World app: This is an evolution of the original concept and has much more to do with Disney’s core strategy. These are just some examples of the current turning point in the MVNO market and how MVNO models are evolving.

Appendix

Further reading

MVNO Outlook: 201419, TE0009-001357 (October 2014)

“Google MVNO plans put operators’ wholesale strategy into the spotlight,” TE0012-000540 (April 2015)

MVNO pricing: Alibaba eschews bundles in favor of usage-based billing, TE0016-000202 (September 2014)

Author

Sonia Agnese, Senior Analyst, Latin America

sonia.agnese@ovum.com

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