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Kenya Towards Mobile Virtue Network Operator: Opportunities and Challenges

Authors:
  • Murang'a University of Technology, Murang'a, Kenya

Abstract

This paper points to the necessity to conduct research on Kenya towards Mobile Virtue Network Operator in regard to Opportunities and challenges. The telecommunication and financial business model is shifting away from full vertical integration of the operator’s value chain towards a higher level of specialization. Thus the threshold of becoming a mobile operator is dramatically reduced with the introduction of the MVNO’s concept. It is possible to be an operator without having to invest in frequency spectrum license or in wireless network infrastructure and without having to build up competence in wireless technologies. The regulators have applauded the new players because they want to enhance competition for the benefit of the customers. MNOs use underutilized spectrum in various service provisions bringing in specialization in areas such as data and mobile money. Business competition makes the consumers enjoy benefits from low fees in mobile money, text and voice services. Kenya lack of legal provision for infrastructure sharing, leaving the operators to consent to autonomous agreements with interested parties. Issues raised by MNO include Cannibalization of the MNOs market share by MVNOs, Hostile response from poor MVNO performance, unfriendly choice of MVNOs for partnering purpose. The purpose of the regulator should be increased competition i n the mobile communications market, financial and quickening the improvement and the development of new services and technical innovations. Therefore, the entry of MVNOs into the market should be seen as an opportunity that will increase the uptake of mobile services in key segments such as mobile commerce, finance, voice and data.
Management Science and Information
Technology
2016; 1(1): 1-7
http://www.sciencepublishinggroup.com/j/msit
doi: 10.11648/j.msit.20160101.11
Kenya Towards Mobile Virtue Network Operator:
Opportunities and Challenges
Tirus Muya Maina
1, *
, Charity Mweru Maina
2
1
Senior Information and Communication Technology Technologist II, Information and Communication Technology Directorate, Murang’a
University College, Murang’a, Kenya
2
Information and Communication Technology Officer, Library and Learning Resource Services, Technical University of Kenya, Nairobi,
Kenya
Email address:
tirus.maina@gmail.com (T. M. Maina), tmuya@mruc.ac.ke (T. M. Maina), charitycharo@gmail.com (C. M. Maina)
*
Corresponding author
To cite this article:
Tirus Muya Maina, Charity Mweru Maina. Kenya Towards Mobile Virtue Network Operator: Opportunities and Challenges. Management
Science and Information Technology. Vol. 1, No. 1, 2016, pp. 1-7. doi: 10.11648/j.msit.20160101.11
Received: August 26, 2016; Accepted: September 5, 2016; Published: September 29, 2016
Abstract:
This paper points to the necessity to conduct research on Kenya towards Mobile Virtue Network Operator in
regard to Opportunities and challenges. The telecommunication and financial business model is shifting away from full vertical
integration of the operator’s value chain towards a higher level of specialization. Thus the threshold of becoming a mobile
operator is dramatically reduced with the introduction of the MVNO’s concept. It is possible to be an operator without having
to invest in frequency spectrum license or in wireless network infrastructure and without having to build up competence in
wireless technologies. The regulators have applauded the new players because they want to enhance competition for the benefit
of the customers. MNOs use underutilized spectrum in various service provisions bringing in specialization in areas such as
data and mobile money. Business competition makes the consumers enjoy benefits from low fees in mobile money, text and
voice services. Kenya lack of legal provision for infrastructure sharing, leaving the operators to consent to autonomous
agreements with interested parties. Issues raised by MNO include Cannibalization of the MNOs market share by MVNOs,
Hostile response from poor MVNO performance, unfriendly choice of MVNOs for partnering purpose. The purpose of the
regulator should be increased co mpe tit ion i n the
mobile communications market, financial and quickening the
improvement and the development of new services and technical innovations. Therefore, the entry of MVNOs into the market
should be seen as an opportunity that will increase the uptake of mobile services in key segments such as mobile commerce,
finance, voice and data.
Keywords:
Equitel, MNO, MVNO, Regulator, Telecommunication
1. Introduction
Apparently saturated markets, increasing competition and
higher end-client expectations on quality-of-service and
innovation alongside more networth technological
advancement and heterogeneity/differing qualities in terms of
end-client service and content demand are the present
business sector challenges facing today’s network operators.
While encountering cost pressures, ever-increasing
technological complexity and deficiency of skills and
resources, they need to identify new approaches of real
differentiation and unique value proposition, outperforming
their competitors on time-to-market [5].
Currently, The telecommunication and financial business
model is moving away from full vertical integration of the
operator’s value chain to a higher level of specialism.
“Specialists”, turning away from mere coverage and capacity
provision and focusing solely on end-user service
development, content, branding, marketing and sales, are
emerging [23]. The latter are often establishments with a
strong brand and consumer emphasis against a media or
content background. The limitation of becoming a mobile
operator was dramatically reduced with the introduction of
the MVNOs concept. It is potential to be an operator without
having to invest in in wireless network infrastructure,
frequency spectrum license or and without having to build up
2 Tirus Muya Maina and Charity Mweru Maina: Kenya Towards Mobile Virtue Network Operator: Opportunities and Challenges
competence in wireless technologies [1].
The MVNO concept is a very attractive option for such a
“specialist”, aiming at significantly reducing the required
resources and permitting the new entrant to concentrate on
the really critical, market- side success factors. Since there is
no necessity for a spectrum licence, complex and expensive
radio network roll-out, or ongoing maintenance of the latter,
market entry barriers are lower than for a full MNO [5].
With the solid and fast growth in the mobile
communications market reflected in the explosion of the
number of mobile phones subscriptions, companies both
inside and outside the telecommunication branch have been
attracted to the mobile sector [6]. Each nation or state has a
limited numbers of accessible frequencies, and, therefore, can
only award a limited number of licenses. Due to the large
number of players applying to be mobile operators and only a
few of them are able to get a license, both because of the
limited number of licenses and the huge cost of building a
mobile network, new types of players, MVNOs, have
emerged. The regulators Communication Authority of Kenya
(CAK) have applauded the new players since they want to
enhance competition for the advantage of the users [1].
2. Understanding Mobile Virtual
Network Operator
The MVNOs provides mobile services to end-users
without possessing its own frequency spectrum, a radio
access network and backhaul network, as it buys such
capacity from a host MNO [5]. These MVNOs firms make
business engagements with one or more licensed MNOs by
leasing from them the access to mobile network and
capacities.
Such business concept enables the MVNOs to
take part in the mobile
communications
market, in this
manner expanding the value chain and providing innovative
mobile
communication
services specifically adapted to
target segments [3].
Generally, MVNO is well-defined as an operator that
offers mobile services to end-users but does not have a
governmental licence to use its own radio frequency [31].
MVNO has right to use to one, or in principle, perhaps more,
of the radio elements of a mobile operator and is able to offer
services to subscribers using such elements [1, 3, 8].
MNOs controls the whole chain of values needed to yield
mobile telecom services. It holds a radio spectrum license,
issues its own SIM cards, owns and operates the
infrastructure together with the base stations, switches and
the gateway with the home location register (HLR) [1, 3, 8].
MNOs is in full control of marketing, branding and pricing,
as long as it stays within the regulatory framework. However,
the MVNO issues its own SIM cards, has its own switch,
home location register and service platforms, and has a full
customer-care and billing system [8, 2].
The two main types of operators are: mobile network
operators (MNOs) that provides mobile network for the
purposes of transmitting, distributing, or providing messages
and mobile service operators (MSOs) transmitting messages
over a mobile network obtained for use from a mobile
network operator [8]. MVNOs make available mobile voice
and data services without owning the access rights to
the spectrum they use [2]. Consequently, MVNOs can be
termed as a subgroup of MSOs and the radio capacity used to
provide these services is gained through commercial
agreements with licensed mobile network operators. For an
MVNO having no background in telecommunications to
succeed it should have a strong brand that is known from its
other operations an example of such in Kenya include Equity
bank of Kenya, Nakumat, Kenya Airways etc.
3. MVNO in Kenya
Kenya lately opened up the market by legislature to
MVNOs, basically signifying a mobile carrier can come in
and lease infrastructure and go straight into business. New
mobile carriers utilize excess capacity on the existing 3G and
2G sites of mobile carriers. In Kenya’s instance Airtel is one
of the bus providing capacity to the MVNOs which include
Equitel owned by Equity Bank’s and Kenya airways. There is
a total of 5 MVNOs with intent to play in the Kenyan space,
these include Zioncell, Equitel, Kenya Airways, Tangaza
Money and Nakumatt [15].
The Equitel MVNO accords the Bank an opportunity to
proceed with its main goal of assisting furthering financial
inclusion and innovative services offerings for all Kenyans
by presenting their financial services offering on to a single
platform which will make banking services more accessible,
flexible convenient and more affordable [14, 32]. As the host
and partner operator for Equitel, Airtel is the mobile operator
that is pioneering this innovation in the Kenyan Telecoms
Industry. The company MVNO services will run on the
excess capacity on its network, ensuring that it maintains
seamless quality experience to its consumers both Airtel and
Equity bank of Kenya [14, 11].
Equity MVNO will simply mirror all its banking services
into the cellphone. By integrating the bank account to the
mobile phone, customers can apply for loans, transfer money
into and from their bank accounts and pay bills. In addition,
through Equity banks' multi-channel connectivity, customers
will be able to carry out cross border transactions from their
cell phones. They will receive international remittances onto
their accounts and access through their mobile phone
numbers, Equity Agents, ATMs or branches [14, 11]
4. Opportunities of MVNO Technologies
4.1. Opportunities for MNO
MVNO’s help MNOs use underutilized capacity in various
service provisions bringing in speciality in areas such as data
and mobile money which could help end monopolies by
reducing market dominance [21]. MNOs gain benefits such
as incomes generated by MVNOs for the use of the
infrastructure, reduction on operational cost, sharing of risk,
Management Science and Information Technology 2016; 1(1): 1-7 3
improvement of the network effectiveness, economies of
scale, and extension of their market to particular unexplored
niches [25]. [21] Noted that, MVNOs are an avenue for
MNO to generate income in various services but are not good
at by providing excess capacity for the new operators to
customize attractive services. This excess network capacity
can therefore be made accessible to MVNOs who are often
smaller but innovative enterprises with the ability to attract
subscribers by targeting niche market segments to address
client specific needs.
[30] cited that there can be significant benefits to MNOs
that offer MVNOs wholesale access to their mobile
networks. The benefit arises primarily in the form of
Extending mobile services to market segments with which
MNOs have not had much achievement before; they will be
Market growth by reaching entirely new or previously
unserved market segment and geographical area; they will
achieve Better network utilization, realization of economies
of scale and Lower operational cost due to wholesale access
by MVNOs; The MNOs will Effectively achieve product
bundling and cross selling utilise low operational cost of
MVNO to expand into low margin and niche area [24, 17].
4.2. Opportunities for MVNO
In Kenya MNOs like Safaricom Ltd has been bound by the
CAK to share its mobile money infrastructure with its
competitors, a boost for new entrants who will not have to
invest resources MVNOs’ major objective is to utilize the
unused broad infrastructure and resources of telecom
companies [34]. Another avenue through which MVNO’s can
engage the current Kenya market and make a difference
according to [10] is the Premium SMS/USSD Services.
MVNO’s can focus on implementing company and business
communication to their consumers (B2C) including the usage
of bulk SMS services at a cheaper price. Such services,
include SMS invoices, and corporate messages at a lower
price than that of the current mobile telecommunications
offer.
[2] Noted that Better use of network capacity by MVNO
includes capacity on 3G networks that would otherwise have
remained idle thus enabling network operators to spread
network costs and reduce the average costs of service
provision, [10] concluded that MVNOs need to develop
innovative product and customer service offerings. MVNOs
will need to offer customers attractive pricing packages,
greater incentives for competition more generally between
network operators to supply network capacity to the
MVNOs.
New MVNOs could exploit Online Payment Services and
ensure that products and services being offered online can be
paid through their service. This services would allow mobile
phone users in Kenya to make online payments that cut
across the major platforms, such as credit card requirements,
and get SMS authorization and confirmation. This implies
that via the mobile phone, the MVNO will be the association
between the buyer and the internet outlet [10].
MVNOs, as new players in this business sector, could act
as a assertive force for competition, explore niche segments
and offer of new mobile services unfeasible, or merely
uninteresting, to established operators [36]. The MVNO will
venture into new market niche that the MNOs were not able
to and provide value added new services and products to their
customers. Due to absence of competition, the establishment
of MVNOs is a growing industry and even if major
telecommunication try to suffocate their existence, the likes
of the operators are countable in Africa which is why this is a
great opportunity currently in Kenya [11].
With the new Equitel MVNO service, Equity bank will
provide the most protected banking platform delivered via
the mobile phone. Pricing strategies will reduce the
middlemen layers of fee associated with mobile money
transactions saving money for each Kenyan and the Kenyan
economy as a whole [14].
4.3. Opportunities for Consumers
The telecom company is aiming to improve their mobile
money services and collaborate with more banks and
merchant outlets. Safaricom Ltd is planning to have 600 tier
one and tier two Supermarkets to use its merchant checkout
system. Such positive business and market competition
makes the consumers enjoy benefits that could include lower
rates in mobile money, text and voice services [10].
One of the purposes and key benefits to consumers that
MVNOs would bring include the following as highlited by
[16] and supported by other scholars: The MVNOs is
anticipated by the customers to provide expanded choices of
value added products and services, the customer would have
a wider range of organisations offering them a complete
mobile service, vertical financial services and an expanded
range of service providers from which 3G customers can
choose [2].
It is observed by [30] that the entry of MVNO in the
mobile market raises the level of competition by providing
consumers with a wider choice of service providers, a wider
range of innovative value added services and more
competitive pricing plans. In Regards to pricing, most
MNVOs are always cheaper than the networks they ride on.
Almost all MVNO plans are prepaid, and consequently, run
on extremely low margins. Customers pay slightly above the
wholesale rates at which network access is bought by the
MVNO [35, 36]. [35] Further noted that customers of the big
carriers pay more than the price paid by customers of
MVNO’s in most cases.
[18] Noticed that the entry of Zioncell, Mobile Pay and
Equity Bank through Finserve is already being felt in the
market, with consumers already anticipating benefits that
would accrue from reduced costs of transfer, convenience as
well as more platforms and providers to choose from.
Safaricom, the industry market pioneers, is already feeling
the heat from MVNOs, a factor which must have leading to
its recent downward revision of MPESA transfer rates.
MVNOs are also promising to improve availability, and in
a greater sense promote financial inclusion, providing
common people with financial services from the convenience
4 Tirus Muya Maina and Charity Mweru Maina: Kenya Towards Mobile Virtue Network Operator: Opportunities and Challenges
of their handsets. Equity Bank’s Finserve will not only offer
mobile banking services but also cheaper data and voice call
rates [18]. This reduction of transaction cost by Safaricom
could set the stage for a price war bound to see the cost of
money transfer reduce significantly, with consumers standing
to be the biggest winners [35, 36].
4.4. Opportunities for Regulator
Regulators around the world including Communication
authority of Kenya (CAK) in general agreed that the market
itself through commercial negotiations and legal enforcement
is best positioned to regulate the provision and growth of
MVNO services in Kenya.
In most nation and states, regulators have refrained from
mandating the MNOs grant MVNOs open access to their
networks. However, regulators in some countries and
regions, such as Kenya, Spain, Hong Kong, Japan, and
Slovenia, do not believe the marketplace will allow MVNOs
to succeed without legislative help and have opted to
introduce regulation that forces MNOs to open their networks
to MVNOs and that regulates at least some aspects of the
wholesale agreement between MVNOs and MNOs [38, 21].
The regulator CAK In support of their decisions have often
cited welfare-enhancing objectives, such as improved
competition, consumer choice, lower retail prices,
innovation, service diversity, and more efficient use of scarce
spectrum resources [39, 38, 21]. This new license category in
Kenya is among the benefits accrued from CAK adoption of
the unified licensing framework (ULF) in 2008. The ULF
collapsed all the technology specific licenses into three
categories: Network Facilities provider, Application service
provider and content service provider with the aim to harness
the technological opportunities presented by convergence [9].
The Kenyan regulator CAK facilitates the MVNOs since
they offer consumers a wider choice of services and
applications at lower prices, and therefore result in a more
efficient and effectively use of the limited spectrum [21]. The
CAK will enable Promote competition by enabling operators
who do not have resources to obtain radio spectrum right to
participate in the 3G business market which include Equitel,
Nakumat, Kenya airways Tangaza money and any other that
will be engaged in future.
5. Challenges for MVNO Technologies
5.1. Challenges for MNO
Though MVNOs Technologies have been implemented in
Kenya still there limited and unclears regulations by
exhibited by the MNOs and other stakeholders. According to
[19] The CAK has developed guidelines that will in general
act as safeguards to the end users in terms of quality of
service, billing and customer care. Under the Obligations the
MVNOs are obligated to provide services within the set
Quality of Service parameters and targets as set by the
MNOs. The Kenya CAK plans to come up with new
regulations that will push the current four mobile operators
including Safaricom, Airtel and Orange Telkom to share their
infrastructure, since spectrum for more mobile operators is
limited.
Kenya has not had a legal provision for telecommunication
infrastructure sharing, leaving the operators to sign
independent partnership settlements with interested parties.
According to [22] the regulator demanded that the MNO
especially Safaricom accept hosting the MVNOs signalling
the regulator’s intention to make infrastructure sharing
mandatory. According to the CAK all MVNO must submit to
the authority, for approval, a framework of hosting MVNOs,
indicating the numbers to be hosted and timelines.
The MVNO will ride on the prevailing infrastructure of the
MNO at a fee to offer their services, saving them the heavy
capital expenditure associated with rolling out
telecommunication networks and which the regulator
pronounces will promote competition. This concept was met
with a lot of confrontation with a number of concerns that
they do not allow the MVNOs on their network to offer voice
or data services because this would compromise the quality
of services. They argued that they were ready to work with
them if they are coming on board to add value to the
prevailing services [22].
MVNO licences in Kenya fall under the Application
Service Provider (ASP) category, which comes with a fee and
enables an entity to offer services such as customer
registration, SIM card issuance, billing and customer care to
end users without holding a spectrum licence which the
MNO noted that to be very low inconsideration on how much
they invested in the infrastructure [33].
[33] Observed that there is the fear of permitting MVNO
advantage in the provision of lucrative data services will
mean the Host Operator will become a "dumb pipe" starved
of these additional revenues. MVNOs, as a largely
unregulated area of the market, will have all the benefits of
being an operator without any balancing licensing
obligations. Also according to [24] It is a critical
prerequisite to success that the MNO is convinced that the
selling power of the MVNO brand can be used to increase
the number of customers on the Host Operator ’s network by
attracting new subscribers that they would not have been
likely to attract.
MNOs have a major concern that they run the threat of
competing with MVNOs in the same market, but from a
dependent position respect to the MVNOs [26, 27]. In
summary [30] noted that the concern for MNO could be the
aspect of Cannibalization of the MNOs market share by
MVNOs, Repercussion from poor MVNO performance,
adverse selection of MVNOs for partnering purpose and
Greater client agitates.
5.2. Challenges for MVNOs
MVNOs are often perceived as small players or start-up
companies, so they need a really effective and efficient
marketing plan in order to raise awareness of the uniqueness
of their offer, and why consumers should choose to go with
them rather than one of the major MNOs [13]. High
Management Science and Information Technology 2016; 1(1): 1-7 5
interconnection cost has been noted to significantly prevent
MVNOs from offering competitive off-net calling since call
volumes are unpredictable.
For MVNOs price instability is another big issue as they
do not have the financial means to engage in price wars. To
ensure the long term success of MVNO some level of price
stability is required. When negotiating with MNOs a MVNO
can protect themselves by having wholesale prices linked to
retail prices or by building re-negotiation and exit clauses
into the contract [12].
The Resistance by MNOs who are the industry giants
apply strategic priorities in fear of competition from the
upcoming MVNOs. [28] stated that the competition has been
analysed to understand the consequences of a possible bad
conduct displayed by the MNO. Bad conduct on the part of
an MNO towards MVNOs consists of fraudulent or
unauthorised use by roaming subscribers; a unilateral rise of
economic conditions and an unanticipated drop in quality of
service.
Rigid regulations are also perceived to be holding back the
emergence of MVNOs. [12] Observed that the concept hasn't
been embraced by all mobile regulators or MNOs. In markets
with operator centric regulations the emergence of MVNOs
brings another dynamic to the table that regulators find
difficult to understand how to promote healthy competition
and guarantee fair and equal terms to smaller players.
[12] Observed that Network quality and lack of Network
capacity is an issue that plagues many of the MNOs in
emerging markets around the world and poses the same
problems for MVNOs. Without the proper support of the
operators' network infrastructure MVNOs will struggle to
provide a high quality service and take advantage of data
technologies to increase their long term profitability.
Regulators in the communications sector need to step in and
put pressure on operators to meet standards for quality
service so that MVNOs can do the same [12, 13].
5.3. Challenges for Regulator
The CAK main objective is to increase competition in the
mobile communications market and hence hasten the
innovation of new services and technical innovations. Thus
support MVNOs because they promote this objective. To
make the mobile communications market easier to access,
CAK the country regulator in Kenya can impose incumbent
operators to lower the entry barriers to the market. [8]
suggested some of these market entry strategy include mobile
number portability and price regulation of interconnection
and termination fees and the regulation of these fees is
essential to enter into telecommunication.
The directive by CAK has not been supported well with a
number of players already protesting the directive to share
infrastructure and the cost of the MVNO license. The MNOs
has protested sharing of its infrastructure inconsideration
they have invested heavily on the same license fee is too low
and unfair as the MVNO will be competing against other
players who have already invested in infrastructure and client
base [20].
The MNOs are protesting because the licensees to MVNO
will be able to provide all services currently being provided
by MNOs including customer registration, SIM card
issuance, billing and customer care services to end users. At
the same time, the cost of building a mobile cellular network
is high and few entities have the capacity to invest in such
infrastructure [19]. According to the regulator the MVNOs
will however not own any spectrum license and will not also
put up any infrastructure but utilize excess capacity from
MNOs with which they have signed contracts. The MVNOs
will however be assigned their own numbering range where
they request and provide services as bona fide entities [21,
19].
Despite the optimistic features outlined [24] noted that,
there are a number of regulatory recurring issues which have
led many to conclude that this MVNO has significant flaws
and discourage MNOs. The most significant problem is the
basic conflict which MNOs face, that by authorizing access
to their network they are permitting the creation of a
competitor which will lead to a reduction in their client base.
There are also clear and understandable security concerns
regarding giving an outsider access to the MNOs most
important and expensive asset, its core network. [17]
Observed on the level of price discount is regulatory critical
factor: too low a discount and the MVNO remains a niche
and too high and the MVNO can start price wars and
cannibalise the parent MNO's services. Conversely, opening
up the market to some commercially negotiated deals could
stop any further regulatory intervention.
6. Conclusion
The Kenyan market could see the entry of an array of
MVNO services through partnerships between
telecommunication, finance and other service industry
organisations spurring innovation and improving customer
experiences, increased competition and price wars, and
partnerships between Telecommunication and companies in
other verticals [29]. CAK should ease the operations of
MVNOs since they offer consumers a wider choice of
services and applications at lower rate. This has resulted in a
more efficient use of the limited spectrum. Regulators around
the world are in consensus that the market itself through
commercial negotiations and legal enforcement is best
situated to regulate the establishment and growth of MVNO
services [38, 14].
MVNOs in Kenya also endeavour to enhance accessibility,
and in a greater sense promote financial inclusion, providing
Kenyans with financial services from the convenience of
their Mobile Phones. Therefore, the entry of MVNOs into the
market should be seen as an opportunity that will increase the
uptake of mobile services in key segments such as mobile
commerce, finance, voice and data. This is in Consideration
that 96 per cent of transactions in Kenya are still done in
cash, meaning that there’s still a huge untapped opportunity
for other modes of transaction in MNOs.
6 Tirus Muya Maina and Charity Mweru Maina: Kenya Towards Mobile Virtue Network Operator: Opportunities and Challenges
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... The research focused on those theories and frameworks that help in the management and the performance of small businesses. One such theoretical consideration is the resource-based view (RBV) of the firm (Barney, 1991) with emphasis on how valuable, rare, inimitable and organised resources are (Mweru & Maina, 2015). Through the existence and utilisation of such resources (physical and non-physical), small businesses are not only able to attain a competitive advantage but also to perform better. ...
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MVNOs (Mobile Virtual Network Operators) are companies that function as mobile operators but do not have their own frequency spectrum allocation or the necessary network infrastructure. Those companies make business arrangements with one or more licensed Mobile Network Operators (MNOs) by leasing from them the access to mobile network and capacities. Such business concept enables the MVNOs to participate in the mobile communications market, thus extending the value chain and providing innovative mobile communication services specifically adapted to target segments. MVNOs have significant share on the mobile market in Europe and make influence on customers of mobile services in the meaning of change a telecom company and develop the new competitive strategies. The aim of this paper is to evaluate and predict the growth strategies of the MVNOs into the South-eastern Europe markets (SEE). Findings of comparative analysis have based on the research of secondary sources, practice of EU countries with licensed MNOs and MVNOs and on our expert opinion. Findings indicate that MVNOs which are financially strong have used service development strategy on the present market, while companies which operate in mobile telephony as a core business have chosen market development strategy. Strategy of diversification is the most applicable for companies which have a background and its core business within fixed and Internet and have added mobile telephony services to its portfolio. Strategy of expansion on the present market in combined with present services is not frequent on MVNO market. As an alternative growth strategy, MVNOs in SEE countries will apply a diversification strategy that implies parallel development of new services and new markets with the aim of expansion. The major motive for applying the diversification strategy can be a relatively small existing customer base and a new market entry. Appearance of MVNOs on the SEE market will be in form of partnership strategy with existing MNO as a form of international contracting cooperation. Pan-European global MVNO will change the industry of mobile market which will be driven by market forces, technological evolution and it will present an example of creative process destruction.
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A mobile virtual network operator (MVNO) provides mobile telecommunication services by eluding the constraints of the radio communication infrastructure and establishing an agreement with a hosting network operator (HNO) for the use of its spectrum. Thus, MVNOs offer a wide range of mobile services and directly compete with every mobile network operator (MNO). This paper studies the economic justifications for potential regulatory intervention that defines the level of mobile termination rates (MTRs) and negotiations and agreements among MVNOs and HNOs. The results show that symmetric MTR reduction leads to competition growth among operators, forcing every operator to reduce retail prices and, consequently, to enhancing consumer welfare. The paper also finds that a collaborative strategy adopted by an HNO and an MVNO is advantageous for both and induces a reduction in retail prices, thus weakening other MNOs.
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  • L Armyr
  • T Hauger
  • V Masdal
  • K.-A Skow
A. Lillehagen, L. Armyr, T. Hauger, V. Masdal and K.-A. Skow, "An Analysis of the MVNO Business Model," Telektronikk, vol. 97, no. 4, pp. 7-14, 2001.
Licensing of Third Generation (3G) Mobile
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P. Xavier, "Licensing of Third Generation (3G) Mobile," in Briefing paper for ITU Workshop on licensing 3G Mobile, 2001.
Mobile Virtual Network Operators -Assessing
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  • A Gahnström
S. Kristensson and A. Gahnström, "Mobile Virtual Network Operators -Assessing," 2001.