What does an MVNO mean?
MVNOs act as mediators who buy wireless communication services from Mobile Network Operators (MNOs) at wholesale prices and then provide them to consumers at flexible retail rates. MNVOs themselves do not own wireless network infrastructures and hence, their capital expenditure is lesser than that of MNOs. As a result, services offered by MVNOs are cheaper.
In 2015, Saudi Arabia was recognised as the biggest MVNO market in the Middle East. Of the total MVNOs in the region, 36.4% use ethnic models. These models help MVNOs target niche market segments and meet network demands of specific groups. Virgin Mobile, FRiENDi, Lebara, and Renna are the leading MVNOs in the Middle East.
“Compared to North America and Western Europe, MVNOs’ prevalence in the Middle
East is low, but not restricted.”
Why are MVNOs needed?
Initially, when MVNOs had stepped into the network sector, they were seen as competitors by MNOs. Hence, MNOs were reluctant to establish business relations with them. However, it was later realised that MVNOs can b
ring benefits to the industry and customers in the following ways:
- MVNOs bring about price competition in the sector along with innovative tools and models.
- They act as intermediaries between MNOs and customers.
- They independently make flexible network usage schemes to attract customers.
- Their efforts directly increase the customer-base of MNOs
- They focus on niche market segments.
The future growth of MVNO market in the Middle East is attributed to the below mentioned key points:
- If Saudi Arabia continues to witness MVNOs’ subscriber acquisitions in the same pace, the Middle East will eventually see an expanded MVNO market.
- Expected entry of more number of MVNOs in Iran too will bolster the market.
- Services like number portability and 4G will continue to create a larger customer-base.
- In 2015, the Communications and IT Commission (CITC) of Saudi Arabia reduced the wholesale mobile termination rates (MTRs) from SAR0.25 to SAR0.15, a 40% cut. The CITC also announced the reduction of fixed termination rates to SAR0.07 from SAR0.10. These relaxations in rates will promote price competition and smaller operators like Zain will be able to enjoy competitive advantage.
However, it should be noted that accompanying these positive points are challenges arising out of intense price competition. MVNOs might find it difficult to hold larger subscriber market share. Hence, they will have to invest their ideas and funds in development of innovative marketing techniques. For example, Virgin Mobile has been using digital and social media platforms to promote its services, which helped them earn a good subscriber market-share in Saudi Arabia.