1. Helsinki University of Technology Networking Laboratory MOBILE VIRTUAL NETWORK OPERATORS: CASE FINLAND Annukka Kiiski Helsinki University of Technology annukka.kiiski@hut.fi 6.9.2004 ITS 15th Biennial Conference, Berlin

2. Helsinki University of Technology Networking Laboratory Outline MVNO definition Regulation MVNO business strategy scenarios Case study: Finnish market –overview –effect of the deregulation –MVNO strategies Conclusions

3. Helsinki University of Technology Networking Laboratory MVNO definition provides mobile voice and data services without owning the spectrum license –network capacity is gained through commercial, bilateral agreements delivers its own SIM cards takes care of –branding of the services –marketing of the services –billing of the services –customer care can be divided into subcategories (light – true) based on –network components owned by MVNO (a technology-based definition) –services provided by MVNO itself (a service-based definition)

4. Helsinki University of Technology Networking Laboratory Regulation Communication directives issued by EU have enabled the business opportunity for MVNOs –main focus is to obligate network operators to lease out network capacity at a fair price Regulatory acts –mobile number portability –regulation of interconnection, call termination and call origination fees Not all EU members have incorporated the European Union Directives into national law

5. Helsinki University of Technology Networking Laboratory MVNO business strategy scenarios (1) low price narrow focus service differentiation service reselling international clustering –defined by analyzing the business environment, MVNO’s strategic position on the market and its internal resources

6. Helsinki University of Technology Networking Laboratory MVNO business strategy scenarios (2) Low priceFocusDifferentiationResellingClustering Source of roaming contactsLocal MNO SelfForeign MNO Source of service platformsLocal MNO Self Foreign MNO Importance of content partnersLow HighLowHigh Importance of new servicesLowMediumHighMediumHigh Importance of own brandMediumHigh LowHigh Feasible number of subscribersHighLowLow/mediumHighMedium Feasible ARPULowHigh LowMedium Typical initial target segmentStudentsMinoritiesEarly adoptersOther MVNOBusiness users

7. Helsinki University of Technology Networking Laboratory Case study: Finnish market Advanced and exciting mobile market, because –the first GSM call was made in Finland –until the year 2000 Finland had the highest mobile subscription in the world –competition has long roots because of the numerous local telephone operators –a large number of diverse MVNOs Despite that, Finland has fallen behind in international rankings and mobile data usage during the last two years

8. Helsinki University of Technology Networking Laboratory Finnish market: overview 3 GSM licenses, market shares –TeliaSonera 49% –Elisa Mobile 28% –dna (Finnet Group) 15% –MVNOs and MSOs 8% EU regulation has been incorporated in the Finnish law –TeliaSonera the only SMP in call origination market –all incumbents SMPs in call termination market –mobile number portability 7/2003 Market is really active

9. Helsinki University of Technology Networking Laboratory Effect of the deregulation on the Finnish market incumbents have had to lower their prices and subsidize subscriptions with free air time and goods decrease in the GSM call prices 6,9% during 2003 churn roughly doubled after the MNP and invasion of MVNOs, resulting 23% yearly churn usage of new data services hasn’t increased as expected subscriptions with ’one rate for all calls’ have become popular

10. Helsinki University of Technology Networking Laboratory Finnish MVNO strategies (1) Low priceFocusDifferentiationResellingClustering Tele2 FinlandXX SaunalahtiXXX MTV3X Fujitsu ServicesXX Tele FinlandXX

11. Helsinki University of Technology Networking Laboratory Finnish MVNO strategies (2) Applying the strategy scenario model to the Finnish market shows that Finnish MVNOs are deploying multiple strategies (instead of just one) Only one of the MVNOs (Saunalahti) is making profitable business Only one of the MVNOs (MTV3) is using service innovation to attract new customers

12. Helsinki University of Technology Networking Laboratory Conclusions The defined model is applicable –it helps to explain the strategic options MVNOs have Regulatory encouragement for creating a MVNO opportunity is likely to increase competition and to lower tariff levels The service innovation in Finland did not increase despite the increased competition For MNOs, MVNO is an opportunity in addition to a regulatory imperative