Research Notes

Small mobile players key to segmenting the market

It is critical for MNOs to develop product offerings for each customer segment. In the current competitive environment, this is the best way to achieve high market share. But in a market with many segmented mobile providers already, MNOs need to focus on addressing all customer segments.
In doing so, they should exploit the new possibilities that the growing segmentation of the market offers. This includes, among other things, ensuring that as many segments as possible are covered by the mobile providers on the MNO’s network. The MNO must focus on having a wide selection of mobile providers using their network, after which they can supplement their own sub-brands, or purchase sub-brands by buying up successful mobile providers.
This is a completely different approach to the current one where MNOs tend to adopt a “one size fits all” strategy and attempt to service all customers at the same time. In a fragmented market, MNOs need to focus on having many different mobile providers on their networks that together can span many different worthwhile niche customer segments.
In more mature mobile markets, characterised by many segmented mobile providers without their own networks, MNOs tend to actively use various mobile providers to reach out to different segments that they would find difficult to attract themselves with their existing offerings, or which are too expensive to attract using the MNO’s own brand or sub-brands. Using others to do this significantly reduces SACs and can create profitability even among smaller segments, or even low ARPU segments.
However, it is essential that MNOs do not use their segmentation strategies to eliminate certain mobile providers. Consider an MNO that already has a mobile provider on its network which targets a specific customer segment, or which has a sub-brand themselves targeting a specific segment. Some MNOs might be tempted to avoid entering into wholesale agreements with new mobile providers that target the same segment.
That would be a mistake, as the only alternative for the new mobile provider would be to go to a competing MNO’s network. The MNO would thereby not only lose the revenue the mobile provider might have generated, but a competing MNO will benefit from that network traffic – so it’s a double loss. That is why it’s usually bad business for an MNO to be selective.
The same goes for MNOs that have sub-brands in the same segment targeted by the would-be wholesale partner. Even if the mobile provider already targets the same segment, an MNO will not benefit from being selective. It’s usually always preferable to retrain the mobile provider on the MNO’s network and thus retain their traffic.
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How to get success in the second Generation MVNO Market

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