MVNO Market in Russia and in the World: Main Trends and Perspectives of Development

September 2013

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MVNO Market in Russia and in the World: Main Trends and Perspectives of Development
MVNO Market in Russia and in the World: Main Trends and Perspectives of Development
September 2013

MVNO Market in Russia and in the World: Main Trends and Perspectives of Development

September 2013

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Virtual operators market (MVNO) is still a “hot” topic on the telecommunication market, as a proof a lot of activities are held on this matter. For past year analysts from J’son & Partners Consulting are actively participating in several industry events - MVNO Russia 2012, MVNO & MNP Russia 2013, MVNOs Industry Summit 2013 etc.


J’son & Partners Consulting presents a brief results of market research “MVNO market in Russia and in the world: main trends and perspectives of development”.


MVNO market in the world

Mobile Virtual Network Operator (MVNO) is the concept of the mobile operator without its own frequency resource and base stations (other infrastructure elements may be present). At this point MVNO is already well established in the developed countries of Europe and Asia, the U.S. and Canada, and gradually spread to emerging markets. Globally, according to Wireless Intelligence on May 2012, there were more than 1,000 mobile virtual network operators, including 812 “pure” MVNO and 224 companies - large sub-brand operators. Ten largest MVNO in 2013 had 1.4% share of the global mobile market by subscribers, others had 0.4% - on another MVNO, which were not included in the top ten.


In general, the global market for virtual operators is geographically heterogeneous even within the same macro-region. For example, in Western Europe, where the main parts of the MVNO are presented, the proportion differs significantly from country to country. For example, in early 2013 in Italy MVNOs share was 5.2%, while this index of only independent MVNO in Germany and the Netherlands was more than three times - up to 16%.


According to the forecasts of Western research agencies in the medium term (till 2016-2017) MVNO subscriber base in the world will increase to 200-300 million, Western Europe and the United States in the meantime will keep the leading positions.



Business models

MVNO operate on a mass (discounters) markets as well as on niche markets (for example, oriented on migrants, travelers, etc.). In recent years, there are new-generations of MVNO specializing, for example, on inter-machine communication (M2M), mobile financial services, etc. Many fixed-line operators provide MVNO to expand their bundled offerings (broadband internet, fixed telephony, pay TV and mobile), in order to increase ARPU and reduce subscriber churn. On the virtual operators market operate also a lot of specialized providers (Mobile Virtual Networks Aggregators, MVNA), which allow companies to brand (light MVNO) and rapidly create MVNO, providing them with MVNO-packaged solution, the solution of “turnkey”. Rate of return usually delayed for high level projects (full MVNO), which can have almost the entire infrastructure except the base stations and as a result they have quite significant risks. On the other hand, in those countries (Russia is one of them), where mainly telecommunications companies are entering or trying to enter; the MVNO market already have a part of the network and IT infrastructure development, in this case vector can be directed toward the establishment of full MVNO. Virtual operators can also execute the contracts with several MNO to optimize their offerings and increase revenue.


Drivers and constraints

For mobile operators, cellular network virtual operator models have pros and cons. On one side MVNO help mobile operators to expand geographically, reach the niche group of subscribers, fully using underload network resources and to reduce cost for purchase and keeping the subscribers. On the other hand operators are afraid of the high growing competitiveness and “stealing” its subscriber base, decreasing rate of control of MVNO, etc. The last factor pushes operators to create light MVNO that are easier for controlling.


In emerging markets, the development of the MVNO market is constrained by many factors such as the low virtual operator brand awareness in comparison with the brands of major operators which are presented on the market for a long time; has a noticeable development of operator’s sub-brands; insufficient development of retail distribution of MVNO networks; higher tariffs for interconnect (MTR) in some countries, weak support from mobile operators. On the other hand, in recent years there are new opportunities for virtual operators 'new wave', which is a significant motivating factor for the development of models of MVNO, among them are the development of LTE networks and public Wi-Fi (can be used to offload mobile data traffic), the growth of M2M-decisions market, increased consumption of data services at the continuing high rates of international roaming, a steady stream of migrants, the active use of social networks, etc.


Major influence on MVNO market are causing the sectorial regulators; in the meantime the approaches to the regulation may differ even within the Eurozone


Regional specific features

MVNO markets of different countries should be considered in the context of historical and regional development of the mobile market as a whole. For example in the U.S. where in contrast to Russia and other countries with a high proportion of prepaid subscribers, prepaid tariffs pay-as-you-go model and "bring your own device» (BYOD) – are offered by MVNO and resellers, while "big" operators practiced mainly sale of long-term contracts with subsidized phones. In this sense, the scope of the interests are more or less clearly divided between "real" and virtual operators , and there is no conflict of interest (major cellular operators are considering MVNO subscribers as its "wholesale" customers , and MVNO - as its another effective sales channel).


The Western European MVNO market is the largest market of virtual operators - here concentrated most of the projects. The region is leading in the number of subscribers. World's largest multinational MVNO are working the in Western Europe - Lycamobile (30 million subscribers in 16 countries), Virgin Mobile (20 million subscribers), Lebara (7 European countries and Australia; 4 million subscribers), Tesco Mobile (5 European countries; 3,5 million subscribers), Transatel Mobile (5 European countries) etc.

Western European MVNO market is the most highly developed market of virtual operators around the world. It is characterized by a high proportion of MVNO-subscribers (about 15%), covered a huge variety of market segments and target user groups and business models.

In Russia , Eastern Europe, Latin America, China, India and other developing countries, MVNO model is being on the basic step and not only because of the lack of activity control, but perhaps to a greater extent due to the fact that the market for mobile communications in these regions developed by others, different from developed countries scenarios. For example, in contrast to the Western European markets due to the late appearance on the MVNO market in Central and Eastern Europe, "big" operators have already managed to launch customized tariffs, designed for specific groups of users to run their own sub-brands.

Despite the presence of numerous MVNO in a number of countries in Central and Eastern Europe, the virtual operators are not able to capture a significant share of the market.

On developed Asian markets (Japan, South Korea), despite of the dozens existing MVNO (there are also projects on the LTE networks), their share is relatively small. For example, in South Korea, the share of MVNO subscribers as of September 2013 did not exceed 4 %. However, this segment is growing rapidly, largely due to a number of regulator’s initiatives (in particular, the tariffs for MNP). A characteristic feature of South Korean market is that MVNO, generally offer lower rates for voice communication in comparison with the cellular operators, whereas the rates for data transmission from them, on the contrary, much higher.


On the largest emerging Asian markets (China and India) market for virtual operators have not yet formed, but has a high potential. According to forecasts of Pyramid Research, Chinese MVNO share will reach 5% after 5 years from the start of such projects. In India, the emergence of virtual operators prevents the very high competition and low tariffs.


MVNO market in Latin America is also in the very early stage of its development. According to Informa Telecoms & Media, by September 2013 the share of virtual operators is less than 0.2% of the mobile market in the region. In some countries (Colombia, Chile) have been launched quite interesting projects, there is a noticeable subscriber base here, while, for example, in the three largest countries - Brazil, Mexico and Argentina - in total there are no more than 5 MVNO and a very small number of subscribers.


MVNO market in Africa is still at an early stage of development - in the last 5 years on the continent was launched just a few virtual operators, most of them (6 projects) - in South Africa. The main difficulties of African MVNO market associated with under-developed regulatory framework, low ARPU, the insufficient development of the MVNE model, poorly developed distribution networks and the high cost of interconnect rates (MTR), opposition from the mobile operators.


MVNO markets in Eastern and Central Europe, Russia , Latin America and Africa , as well as major developing Asian countries (China , India) are still at an early stage of development. The main constraint is the late appearance of MVNO (many niches are occupied by mobile operators and their sub-brands) , lack of regulation, combating cellular operators and the absence of major national brands. On the other hand, the markets in the medium and long term can become one of the main drivers of the MVNO market.

MVNO market in Russia

80 Russian companies issued 109 MVNO- licenses as of mid-September 2013, according to the data of the Russian Agency for Supervision in the Communications. According to J'son & Partners Consulting, a little more than a dozen projects actually work in Russia, excluding the sub-brands of operators (for example, "Just to talk" by "MegaFon ", " E" by SMARTS , etc.). However, about more than 30 companies with MVNO- licenses received non-geographic numeration in the numbering codes DEF-941, 958 , etc. A number of projects (MTT Mobile, Domolink Mobi, Mobile Qwerty, etc.) launched by telecommunication operators are positioned as a full MVNO, unlike most of the other projects that are simply branded tariffs from the "big operator". For example, MTT operator provides not only marketing and sales, but also billing, pricing, routing and has its own regional and international channels.


Subscriber base of mobile virtual operators in Russia does not exceed 1% of the number of active SIM-cards provider even taking into account affiliated with the host MVNO operators and sub-brands of mobile operators. The share of independent MVNO at the end of the first half of 2013 is estimated by J'son & Partners Consulting, as 0.2% (0.5 million subscribers). These figures correspond roughly to the level of developing countries in Latin America and Eastern Europe and suggest that the MVNO market in Russia is still in a very early stage of its development.

Analysis of the existing and other MVNO-projects on different realization stages (including planned, closed and “frozen”) in Russia showed the following:


The most “viable” MVNO launched by telecommunication companies and the one that are oriented on the national communities. There are also some promising niches such as providing services to the state employees, projects in the segments of B2B and M2M, work on LTE- networks and projects managed by the state ( “ERA – GLONASS”, “Selskaya Svyaz” etc. ). MVNO in retail, which is popular in developed markets, was mostly unsuccessful in Russia.


MVNO of “full cycle” has the greatest potential in Russia that can provide a reasonable direct costs and complete management services. Provided numeral resource in codes of non-geographical numeration (more than 10 million lines) defines the upper limit for the full MVNO subscriber base forecast in the medium term - about 4% of the number of active SIM-cards of mobile communication in Russia

In general the perspectives for MVNO in Russia are mixed and would be largely determined by industry regulators. The largest mobile operators’ awareness of the benefits of using this model and finding the best and optimal business strategies, might be the main market driver. Up to this point, or to a significant change in telecom industry legislation MVNO market in Russia will remain on its basic step, same as in many developing countries.

Detailed results of the Research: “MVNO Market in Russia and in the World:
Main Trends and Perspectives of Development” are Presented in the Full Version (192 pages)


1.MVNO market in the world
       1.1. Main types of market players: MVNO, MVNE and MVNA
       1.2. MVNO classification and project examples
              1.2.1. MVNO classification by target groups
              1.2.2. MVNO classification by infrastructure features
       1.3. MVNO statistic: number of regional operators by world regions, subscriber base and
              market share
       1.4. Evolution of MVNO business-models, virtual operators of new generation
              1.4.1. One virtual operator on the networks of several operators (Multi-MNO)
              1.4.2. Always Best Connected, ABC
              1.4.3. Use of ABC model for users’ data packages
              1.4.4. Management of policies
              1.4.5. Capability of MVNO to provide compliance with routing policies
              1.4.6. Management of MVNO fees charged
       1.5. Main market drivers and constraints
       1.6. MVNO market development in different regions
              1.6.1. USA
            Brief evolution history of MVNO in USA
            Main tendencies and business-models
              1.6.2. West Europe
              1.6.3. Central and East Europe
            Czech Republic
            Other countries
              1.6.4. The Asia-Pacific region
            South Korea
            Hong Kong
            Other countries
              1.6.5. Latin America
              1.6.6. Africa
            Other countries
       1.7. MVNO regulation peculiarities in different countries
              1.7.1. The role of the regulator in the development of the MVNO market
              1.7.2. Examples of regulation in different countries
              1.7.3. Classification of the main approaches to the regulation
2. MVNO market in Russia
       2.1. Background and brief history of the origin of the MVNO market in Russia
       2.2. The main drivers and constraints
              2.2.1. The main market drivers
              2.2.2. MVNO market development barriers
       2.3. Subscriber base and penetration of MVNO
       2.4. Overview of the main projects (existing, closed, planned)
              2.4.1. «Alle»
              2.4.2. «Allo Incognito»
              2.4.3. «A-Mobile» (Auchan)
              2.4.4. «АТS-Smolnogo»
              2.4.5. «Winah Telecom»
              2.4.6. «West Call»
              2.4.7. «Gars Telecom»
              2.4.8. «E»
              2.4.9. «Euroset»
              2.4.10. «Zenit Mobile»
              2.4.11. «Corbina Telecom»
              2.4.12. «Mango Telecom»
              2.4.13. «Matrix Telecom»
              2.4.14. «Megafon»
              2.4.15. «Mobile Medical technologies»
              2.4.16. MTS
              2.4.17. «МТТ.Mobile»
              2.4.18. «Narodny mobile phone»
              2.4.19. «NIS-Glonass» and NP «Glonass»
              2.4.20. «Osnova Telecom»
              2.4.21. «Russian Post»
              2.4.22. «Prosto dlya obshenia»
              2.4.23. «Raduga Internet»
              2.4.24. «Rostelecom»
              2.4.25. «Rostelecom» («Plus one»)
              2.4.26. «Tattelecom» («Letai»)
              2.4.27. «TransTeleCom»
              2.4.28. «Central telegraph» («Mobile QWERTY»)
              2.4.29. «Eldorado»
              2.4.30. EkoMobile
              2.4.31. Orange Business Services
              2.4.32. Pond Mobile
              2.4.33. SunSim
              2.4.34. Tele2 Russia
              2.4.35. Virgin Mobile
              2.4.36. 7K
              2.4.37. Other projects
       2.5. MVNO on 4G/LTE networks
              2.5.1. Prerequisites for the emergence of MVNO on LTE networks
            The high cost of network deployment and a large payback of LTE networks
            Underload network LTE on the basic steps
            Deficiency of frequencies for a wide range of players, low competition
            Other prerequisites
              2.5.2. Terms of cooperation between «Skartel» and «Megafon»
              2.5.3. Agreement for work between «Skartel» and other mobile operators
              2.5.4. MTS
              2.5.7.«Osnova Telecom»
              2.5.8. Trends and market prospects
       2.6. Legal framework of MVNO market in Russia
              2.6.2. Allocation of numbering capacity
              2.6.3.Regulation prospects
       2.7. Prospects for the development of communication services on the model of Full
              MVNO in Russia
              2.7.1. MNVO formats: MVNO-tariff, servicing MVNO and MVNO of full cycle
              2.7.2. Pros and cons of MVNO of full cycle
              2.7.3. Promising business-models
3. Forecasts of MVNO development in Russia and in the world
4. Summary and Conclusions
       5.1. List of Russian companies, which have MVNO-license and its status
       5.2. Currently operating MVNO/preMVNO profiles in Russia
              5.2.1. «Alle»
              5.2.2. «АТS Smolnogo»
              5.2.3. «Allo Incognito» («Kantricom»)
              5.2.4. «А-Mobile» («Auchan»)
              5.2.5. «WiNach Telecom»
              5.2.6. «7К»
              5.2.7. «Central Telegraph»
              5.2.8. «Letai» («Tattelecom»)
              5.2.9. «Raduga Internet»
              5.2.10. «МТТ.Mobile»
              5.2.11. MTS
              5.2.12. «Prosto dlya obshenia» (sub-brand of LLC «MegaFon»)
              5.2.13. «Matrix Telecom»
              5.2.14. «Domolink Mobi» and «Selskaya Svyaz» («Rostelecom»)
       5.3.Largest MVNO in the world (Top-10 by number of subscribers)
       5.4.List of companies mentioned in the report


List of Figures

Fig. 1. Classification and examples of MVNO by operating niches and business-models
Fig. 2. Market structure by target groups and business-models, 2013
Fig. 3. Different MVNO business-models on T-Mobile networks
Fig. 4. Number of MVNO by world regions, 2012
Fig. 5. Number of MVNO-projects launches by world regions, 1991-2010
Fig. 6. Number of MVNO-projects launches in the world, 1991-2010
Fig. 7. Number of new MVNO-projects launches in the world, May 2012 and September 2013
Fig. 8. MVNO market state in particular countries and world regions
Fig. 9. MVNO share in different countries, 2005 and 2010
Fig. 10. MVNO business-models evolution
Fig. 11. Types of MVNO depending on the level of ownership of the infrastructure
Fig. 12. Number of MVNO in USA by operators, 2013
Fig. 13. Share of MVNO subscriber in the overall mobile connections subscriber base in USA, 2004-2010
Fig. 14. Online-designer of the tariffs of Zact operator (USA)
Fig. 15. MVNO market development in the West Europe
Fig. 16. Mobile communication market in UK and MVNO share, 2011
Fig. 17. Mobile communication market in Germany and number of independent MVNO, 2012
Fig. 18. MVNO subscriber base in France, 2009-2013
Fig. 19. Transferred numbers of Spanish major operators and MVNO, thousand of numbers, 2009-2012
Fig. 20. The share of major Spanish operators’ subscribers and MVNO, May 2013
Fig. 21. Changes in the number of connections per month of the major Spanish operators and MVNO, thousand, May 2013
Fig. 22. MVNO subscriber base in Italy, 2011-2013
Fig. 23. Market shares of the main Italian MVNO, March 2013
Fig. 24. MVNO market share in Netherland, March 2013
Fig. 25. MVNO market in Belgium, 3Q 2012
Fig. 26. Changes in subscriber base of mobile connection operators and MVNO in South Korea starting from January 2012 until February 2013 thousand
Fig. 27. Changes in MNO and MVNO subscribers number, Jan. 2012 – Feb. 2013, thousand
Fig. 28. MVNO subscriber base dynamic in South Korea, 2012-2013
Fig. 29. Comparison of ARPU of Korean mobile connection operators and MVNO
Fig. 30. Number of MVNO in Japan by operators, 2013
Fig. 31. Brand shop Disney Mobile in Tokio
Fig. 32. Subscriber share of MVNO in the total number of mobile connection subscribers in Australia
Fig. 33. Subscriber base of Porto Seguro and Datora, thousand subscribers, 2012-2013
Fig. 34. Main barriers of African MNVO market
Fig. 35. Diversification of numbering capacity for MVNO, mln.numbers
Fig. 36. Typical scheme of MVNO launch in Russia
Fig. 37. Main types of MVNO depending on the availability of infrastructure
Fig. 38. Promising and unpromising MVNO business model in Russia
Fig. 39. MVNO subscribers share in mobile connections by regions in the world, 2008-2016
Fig. 40. Number of MVNO subscribers by regions in the world, 2009-2015
Fig. 41. MVNO market share in the world by number of subscribers, 2013

List of Tables

Table 1. MVNO, MVNA and MVNE: Creation chain of service
Table 2. Classification of MVNO by infrustructure features
Table 3. First MVNO on 2G, 3G and 4G networks
Table 4. Main MVNO on 4G networks in the world
Table 5. Pros and cons of different varients of MVNO models
Table 6. Pros and cons of Full MVNO, Multi-MNO and ABC models
Table 7. Pros and cons of MVNO (prospects for MNO)
Table 8. KPI of mobile connection and situation with MVNO in countries of Central and East Europe
Table 9. Examples of successful sub-brands of operators in several countries of Central and East Europe
Table 10. Currently operating and closed MVNO in Poland, 2013
Table 11. Rating of MVNO and MNO in Poland, 2013
Table 12. Main MVNO in Czech Republic, 2013
Table 13. MVNO in Hungary, 2013
Table 14. MNO and MVNO in South Korea
Table 15. Subscriber base dynamic and share of MVNO in South Korea
Table 16. Dynamic of changes in the MNO and MVNO shares in South Korea, 2011-2013
Table 17. Possibilities and complications of MVNO in Africa, 2013
Table 18. Countries classification by approaches in the field of regulation of MVNO
Table 19. The main currently operating MVNO projects in Russia
Table 20. MVNO market in several countries of West Europer and in Russia
Table 21. Numberting capacity in DEF-958 code, provided for MVNO in Russia


Virtual operators market (MVNO) is still a “hot” topic on the telecommunication market, as a proof a lot of activities are held on this matter. For past year analysts from J’son & Partners Consulting are actively participating in several industry events - MVNO Russia 2012, MVNO & MNP Russia 2013, MVNOs Industry Summit 2013 etc.