Monday, September 10, 2007
European MVNOs Pick Up On the Trend To Cost-Conscious Offers…
Enough of the MVNO-bashing in the wake of the Amp’d meltdown. There’s excellent reason to believe the MVNO business has never been as good an opportunity as it is now. The outlook is perhaps at its most positive in Europe, where a marked increase in the number of cost-conscious consumers is ushering in a new wave of discount MVNOs. It’s a tectonic shift that could transform the MVNO market forever, as this worthwhile article in the International Herald Tribune (IHT) points out.
It documents the market dynamics that have given rise to a slew of newcomer MVNOs, including AldiTalk (an MVNO managed by Aldi, Germany’s largest discount supermarket chain, across the E-Plus network); Congstar (the new discount offer belonging to German giant T-Mobile); and BASE (the leader of the pack using the E-Plus network). BASE made its mark by focusing on high-volume callers and successfully sold the first flat-rate mobile packages in Europe. And the list goes on.
Fed up with rigid tariffs and hungry for a change, consumers are ready to vote with their feet if they see a more attractive offer. The article sums it up this way: “Growing ranks of cost-conscious consumers … are transforming the Continent’s mobile phone market by bypassing established networks and forcing big operators to reinvent themselves to stay competitive.
“However, it’s a little early to make a call on the impact of these makeovers – and predict the potential for value creation – both for the companies and their shareholders. But it’s a sure-fire bet that the market is moving away from a one-size-fits-all strategy, an approach that the saturated markets of Europe can no longer sustain. Put another way, a multi-segmented strategy, that meets consumers’ demands for services tailored to their individual lifestyles and life stages, is the way to achieve high performance and create profitable growth.
A question mark may hang over the future of MVNOs that seek to compete on price alone. However, Dutch operator KPN, the network that owns E-Plus, is a prime example of how a singular focus on the customer and the flexibility to develop youth content and value plays, in addition to discount offers, can pay dividends. To date, KPN has signed marketing deals with Aldi and Conrad, an electronics chain; Albert Heijn, a Dutch supermarket chain; the music TV channel Viva; and the Belgian children’s broadcaster Jim TV. From March 2005 through March 2007, KPN added 5.1 million customers, including 3.5 million in Germany, attracted by offers that are tailored to their needs. And here’s another interesting data point: In Germany, E-Plus’s earnings before interest, taxes, depreciation and amortization rose from 21 percent of sales in 2005 to 36 percent by March 2007 on an annualized basis. It is now the fastest-growing network in Germany, with a 15 percent market share. In Europe, the ranks of MVNOs have swelled beyond 100 – and continue to grow. Targeted MVNOs fill an important and lucrative gap in the marketplace, as the IHT article points out. At the same time, they boost the bottom line of the network operators who allow them to piggyback their infrastructure. Moving forward, it’s the ability of MVNOs to engage with the customer – backed up by platforms to enable bundling, charging and delivering of these services – that will likely separate the leaders from the also-rans.
Put simply, the future success of this new breed of European MVNOs depends upon their ability to offer the communication services portfolio that fits their demographic and allows them to target a well-defined market segment. KPN and its partners can read the writing on the wall.
Europe’s other newcomer discounters may have to learn the hard way that offering low prices alone is not enough. It’s about creating a differentiator and a cost-structure to survive and succeed.