Virtual Networks Taking off in Europe

Despite initial distrust of the MVNO model by mobile operators, a study by Tarifica reveals that an increasing number of European mobile network operators are considering allowing MVNOs access to their networks. Tarifica interviewed 12 operators during the course of the study and discovered that of these, 5 already sell airtime to an MVNO and of the remaining, only one is not planning to do so.

According to Nicola Ainsworth, Director of the Mobile Practice at Tarifica, this change of attitude is to large extent due to a snowball effect. She explains " in well established markets, once one operator makes the decision to host an MVNO, other operators tend to act so as not to lose competitive advantage". After all, if MVNOs are going to enter the market then it is preferable to have them on your network and at least gain some revenue from it. It does help that the amount of revenue to be generated from this form of wholesale agreement can be substantial, one European operator states that on average 10% of their overall revenue is generated from the MNVO they host on their network.

European NRAs have been considering regulating this part of the market (where they do not already do so) and the suggestion has been made that network operators should be forced to open up their networks. Ms Ainsworth firmly believes that this will have a negative impact on the market. She argues that the market is already becoming more open to the idea of the MVNO model and that too much regulation is likely to result in protracted legal disputes. This would have the opposite effect of holding back market development whilst concerned parties awaited the outcome of a dispute.

The changing attitude to MVNOs is only one part of the bigger mobile wholesale picture. Whereas previously mobile operators have appeared disinterested in wholesale, many are now following concerted strategies in this area in the hope that this will increase revenues and dispose of excess network capacity. SMS wholesale is one area where all operators are active though indicators have shown that on average this generates less than 1% of overall company revenue.

All operators agree that wholesale will play an increasingly important part in the mobile value chain, certainly with the introduction of GPRS and 3G services. According to Dutchtone, Wholesale is even now an essential part of a mobile operators business and Netherlands based BEN foresees that its wholesale business will account for up to 40 % of overall revenue within the next 5 years.

That said, there is still a long way to go. The Tarifica study discovered that only a handful of operators have dedicated wholesale departments within their organisations and a significant minority still have a 'let them come to us' mentality as far as wholesale is concerned. This will most definitely change and we will see an increasingly active mobile wholesale market in the very near future.'"

Posted to the site on 7th August 2002