The potential of China’s new generation MVNOs

Tata Communications’ Andrew Yeong, shares his perspective on the potential of MVNOs. 

The Mobile Virtual Network Operators (MVNOs) in China have faced many challenges since the market opened to new entrants. So, while the MVNO subscriber share has grown, there is plenty of extra potential for growth. This growth could be unleashed with the adoption of new mobile virtual enablement models, leveraging the cloud, mobile-network-as-a-service solutions, web services and application integration via APIs. The combination of these technologies will bring new opportunities for MVNOs in the greater China market and beyond.

Barely scratching the surface

Initially, wholesale margins on airtime access prevented creative tariffing or innovative new services in China. This made the MVNO model commercially challenging. Industry analysts at GlobalData estimate that MVNO subscribers now represent just over 5% of the region’s total market. Even though the Ministry of Industry and Information Technology in China (MIIT) issued a new batch of 15 MVNO licenses in June 2018, with operators including Xiaomi, Alibaba and JD taking them up, existing MVNOs have tended to focus on providing low-cost data and calling services.

“We’re seeing little innovation in this market, beyond a straightforward discount model, barely scratching the surface of what’s possible. There could be a change on the horizon though.” 

MIIT is clearly anxious to create competition for the incumbent Chinese communications service providers. This, combined with developments in virtualisation and cloud technology and new business models, represents a new route for local MVNOs to succeed.

The traditional approach is limited

The 20 or so existing Chinese MVNOs have focused on prepay-only services so far, which relies on relatively light infrastructure. The introduction of a more complex service mix will require more complex back-office systems, which is not a viable option for most MVNOs. This hampers innovation in the face of strong competition from the Chinese incumbent mobile network operators (MNOs), who can easily compete against MVNO entrants on tariffs and service bundles.

Despite regulation designed to accelerate the growth of the country’s fledgeling MVNO market, in practice, it isn’t easy for these new players to compete. Securing capacity at reasonable wholesale prices in one barrier, as incumbent MNOs can switch on their extensive marketing machinery to retain their subscribers or win back those who have churned.

“In this environment, simply reselling airtime and capacity in an undifferentiated way quickly becomes uneconomical.”

Ahead in the cloud

There are opportunities for ambitious MVNOs to stand out in the crowd and serve specific segments and niche markets with a range of targeted communications services. We’re seeing increasing demand among enterprises and OEMs for next-generation MVNO services in areas like M2M, automotive, SME, youth, or other sub-segments and interest groups. This new wave of MVNOs focuses on differentiated services. To minimise CAPEX, they combine a cloud-based model, service integration via APIs and web-based self-service with relatively little physical communications infrastructure.

While new MVNOs may have different objectives and business models, they have many things in common too. They want to serve a clearly defined target market, have a unique and tailored service proposition, a strong brand and the ability to use the power of online services to engage with their customers.

They also want efficient and flexible charging, billing and settlement options, with comprehensive BSS/OSS capabilities to ensure optimum service. They want access to security and fraud protection capabilities, to safeguard their customers and their business from ever-changing threats. Partner management processes to ensure efficient, automated call and data session handling processes between the MVNO and their MNO host are also a must.

The Mobile Network-as-a-Service (MNaaS) model perfectly suits the new diverse MVNO dynamic, because it doesn’t require any infrastructure or software investment. From a commercial perspective, it can scale up or down as required – making it ideal for smaller niche markets ranging from just a few thousand to several million subscribers.

The virtualised network functionality of the MNaaS model makes it easy for MVNOs to create, launch and develop services.

“While dropped calls and slow data connectivity might be forgiven with a discounted mobile service, it’s not acceptable for MVNOs who want to focus on good quality and coverage, instead of just competitive prices.”

Unleashing the growth of Chinese MVNOs

Next-generation MVNOs and their customers will soon think of mobility in the same way everyone thinks of the world wide web and cloud infrastructure today – it’s ubiquitous, accessible to all, and it simply works. MNaaS can help make it a reality for new MVNOs, spurring the development of new mobile services and IoT applications and making them easier and more cost-effective to manage through the cloud and using 3rd party application integration to create new services. This approach will allow China’s new generation of MVNOs to pursue segments and services that until now haven’t been economically viable.

It will take a shift in thinking to realise the full potential of the MVNO market in China. But we’re already seeing how this model is levelling the playing field between industry incumbents and newcomers, and paving the way for a more competitive, innovative and dynamic market.

Want to meet the new MVNOs on the block? Read our previous blog to see which one fits your business.