How partnerships with MVNOs can help operators to succeed in saturated mobile markets

Many mobile markets in Asia are approaching saturation, not only from a subscriber number perspective, but also increasingly from a revenue perspective. Research suggests that nominal mobile revenue growth was less than 4% in Malaysia in 2011, and in Indonesia, which is still seen as a growth market because of wide regional disparities, overall mobile revenue growth was 7%. This hardly represents a tremendous growth story. Thailand bucked the trend, but only because of the much-delayed launch of 3G services, which accounted for more than half the 8–9% top-line nominal growth.

The old business school adage applies: if a company cannot grow, it is doomed to fail. In this context, operators must look beyond their traditional lines of business to new business models. The era of the voice- and SMS-focused, mass market mobile operator is long gone, and operators face three challenges.

• How to manage the transition to data-centricity in a profitable way.
• How to increase loyalty, reducing churn and capturing an increased share of subscribers' spend.
• How to capitalise upon this increased loyalty in order to capture value in markets non-traditionally addressed by mobile operators.

Although the first of these challenges sits squarely within a mobile operator's core business (it is a technology, marketing and operational efficiency issue), we believe that partnerships will have a central role in addressing the other two challenges.

Increasing loyalty and capturing an increased share of customers' mobile spending

Mobile customers fall broadly into three categories: 'calling card users' who treat SIM cards as disposable sources of minutes; 'optimisers' who manage their usage over multiple SIM cards to take advantage of the best price at all times; and 'loyalists' who value the relationship with their operators and the convenience of a single SIM over price optimisation.

Clearly, established operators would want everyone to be loyal – as long as it is to them! However, wishing it does not make it true and ultimately the way to move calling card users and optimisers into the loyalist camp is to ensure that optimisation would only bring a marginal benefit.

Of course, this is very difficult for a standalone mobile operator to achieve, but product bundling and reward programmes could help. This is part of what partners such as Tesco (an international supermarket chain) bring to operators such as O2 in the UK, and what ISPs are increasingly doing by creating quadruple-play bundles. These partnerships are hugely valuable for operators, because they can tap into a value pool that sits in a different market in order to increase the attractiveness of their services.

However, a different market might still mean a telecoms market, as with ISPs and indeed with cross-border offerings such as PLDT Global's Smart Pinoy MVNO offer, targeted at overseas Filipino workers in Asia and the Middle East.

In all these cases, one feature stands out: other organisations often know a lot more than operators about mobile subscribers' habits, and this is extremely valuable.

Capturing value in non-traditional markets

Revenue growth will also increasingly come from products and services not in an operator's core service portfolio.

Mobile devices are one area of growth, particularly in Asia where operators have not been very involved in retailing devices.

Other initiatives are worth mentioning.

• Bima (Milvik) offers micro-insurance products to subscribers of Robi Axiata (Bangladesh) and Dialog Axiata (Sri Lanka).
• Merchantrade, a remittance service provider in Malaysia and an MVNO on Celcom's network, offers mobile remittances through its recently launched Doowit product.
• PLDT Global offers a suite of remittance-like services to its Smart Pinoy users, focused on home-country bill payments and cross-border balance transfers. 

The two common features of all these products are that they are all financial services that can be made more efficient through mobility, and all involve a partnership between an operator and an MVNO or supplier that contributes expertise from a new market.

Conclusion

In an increasingly mature mobile environment, operators need to be cost conscious to optimise margins, but they must also become more attuned to their customers' preferences, needs and habits, inside and outside the mobile space. If operators can achieve this, they can continue growing by becoming increasingly relevant and making the most of the unique relationship that people have developed with their mobile devices.

Analysys Mason assists operators and their partners in defining working partnerships that further strategic objectives for both parties and result in innovative solutions for end users. To find out more, please contact David Abecassis (Senior Manager) or Ceri Jones (Lead Consultant).