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MVNO – virtual network operators
In 1999, the OFTEL (Office of Telecommunications), the British regulator, was the first to coin the MVNO (Mobile Virtual Network Operator) term. At the time, a virtual operator meant a company offering mobile communication services without having necessary radio frequency resources. Since then, companies around the globe ranging from banks to logistics corporations have been creating their own virtual network operators.
According to 2015 data of GSMA Intelligence, MVNOs are developed mainly in European countries, Asia and North America.
The new Transparency Market Research report says that the world MVNO market will reach 75 bn USD by 2023. The estimated average growth rate during this period between 2015 and 2023 is 7.4 percent. Market growth rate until 2022 is also impressive, Global Market Insights reports.
Virtual network operators – what drives them?
The MVNO technology is a simple opportunity for third companies to enter the mobile communication market. Banks, industrial corporations, retail, transport and logistics, both medium and major businesses, spotted the future potential of MVNO projects long ago.
Companies do not need to get licenses and build base stations to set up a virtual operator of their own. They rent the necessary infrastructure, the whole or a part of it, from a host operator – the MNO (Mobile Network Operator). MVNOs work under their own brand and can only exist jointly with MNOs.
A synergy of the core business and telecom services opens new business opportunities for companies helping reduce communication costs and ensure customer loyalty. For a host operator, creating an MVNO helps improve penetration, increase customer base, get additional revenue sources from infrastructure lease, promote new services, and much more.
Depending on the volumes of own and borrowed infrastructure, MVNOs are split into types. The more infrastructure an MVNO owns, the broader is the range of services it can provide to its mobile customers.
The basic MVNO type specializing merely on sales and marketing of the base operator's services under its own brand.
Service Provider MVNO
Besides sales and marketing provides customer service and billing.
Enhanced Service Provider MVNO
Offers added value services, produces its own SIM-cards and tariff plans.
An MVNO with a maximum infrastructure. On top of everything else, it operates the network with its own switching center, makes national and international roaming and inter-carrier agreements.
MVNO projects are usually launched by companies committed to making money in the mobile market or major corporations concerned to move from the client level to the level of a service provider. Operators enriching their service portfolios with extra mobile offers can also launch MVNOs.
Despite the apparent simplicity, companies may face a number of challenges in setting up a virtual operator. Deploying a proprietary MVNO infrastructure requires a high level of technical competence. Poor expertise in telecom poses a problem for many companies. Ready-made boxed solutions offer a perfect alternative for virtual operators.
In such a context, so-called "enablers", or MVNE (Mobile Virtual Network Enabler) and aggregators, or MVNA (Mobile Virtual Network Aggregator), facilitate the development of independent MVNOs.
MVNEs are intermediaries between traditional and virtual operators. Enablers commit to solving all technical issues of MVNOs and help save time and costs of putting the MVNO project in operation. MVNEs provide ready-made technical solutions and fix the problems that involve solving non-core tasks for MVNOs.
Working jointly with an MVNE helps virtual operators focus on marketing and sales only, while giving the entire technical part to an outsourced enabler.
MNOs are interested in working only with major MVNOs with a large base of subscribers. Smaller MVNOs struggle to enter the mobile communication market. This is exactly where MVNAs help small players. They aggregate several smaller virtual operators and cooperate with MNOs as a single major MVNO.
The general scheme of interaction of MNOs with MVNOs, MVNEs and MVNAs can look like this:
MVNO – virtual CSPs in Europe
In Europe virtual operators have over a hundred million subscribers. The spread of MVNOs in this region is due to the activities of regulators and mobile operators. Regulators pursue stronger competition and lower mobile rates and operators are interested that their radio frequencies are used efficiently.
One-quarter of MVNOs in Europe work as discounters offering low-cost services
According to the forecasts of Pyramid Research for 2015-2020, data-MVNOs, M2M and ethnic MVNOs will be the most promising segments for MVNOs in Europe. This almost repeats the Russia-specific forecast of the analytics from J’son & Partners Consulting. Data-MVNOs (international roaming), telecom, ethnic, major corporate MVNOs and M2M/IoT are expected to be the most successful.
MVNO – virtual CSPs in Russia
According to TMT Consulting, the number of MVNO subscribers in 2015 more than doubled compared to the previous year reaching 2.5 m. J’son & Partners Consulting predicts that by 2020 the customer base will increase up to 5 m.
Both CSPs and other companies are present in the Russian virtual operator market.
Since 2014 CJSC Gazprom Telecom and Peter-Service have been implementing a project to create a virtual CSP. Rostelecom is testing an MVNO over the network of Tele2 in several Russian regions; subscribers already can purchase SIM-cards of the new operator. Sberbank, also together with Tele2, is working on a new MVNO project for its customers. MegaFon PJSC and Mail.Ru Group started a project to set up a CSP, VKMobile, and are planning to launch it until the end of this year.
Yet, these are just a few projects while, in general, the MVNO market in Russia is poorly developed. The low-cost CSP model that is popular in Europe did not get a foothold locally. For example, MTS and Auchan, an FMCG retail chain, failed to develop the A-Mobile project for supermarket customers. Svyzanoy, a retailer, suspended the operation of Svyaznoy Mobile, a CSP launched in 2013 over the network of MTS, while the MVNO project Alle of X5 Retail Group closed down in 2012 after only two years of operation. CSPs occupied the low-cost rate niche themselves (Tele2).
Experts of J`son & Partners Consulting believe that MVNO development in Russia is, primarily, constrained by mobile operators unwilling to face stronger competition and a lack of pressure from regulators.
Negotiating rental of cell infrastructure with CSPs is hard for independent MVNOs and Full MNVOs also face high capital expenditures related to additional infrastructure.
There is a direct link between the growth of the Russian MVNO and the progress of MVNEs based on major mobile network operators. Yet, independent MVNEs and MVNAs do not exist till today because the conditions of their operation are not defined legally.
With the current challenges, virtual operators still have a future in Russia. Successful projects will be those launched on the basis of well-known mass brands with a big customer base, such as popular banks, payment systems, providers and major companies. As an important factor, they will need to have distributed sales network and a well-developed loyalty program.
definition of megafon and synonyms of megafon (English)This article is about the cellular phone operator. For a sound amplification device, see megaphone. For the Austrian street newspaper, see Megaphon.
MegaFon (Russian: МегаФон), previously known as North-West GSM, is the second largest mobile phone operator and the fourth largest telecom operator in Russia. It works in the GSM and UMTS standard. Its main competitors are VimpelCom (Beeline) and Mobile TeleSystems (MTS). As of June 2012, the company serves 62.1 mln subscribers in Russia and 1.6 mln in Tajikistan, Osetia and Abkhazia. Its headquarters are located in Moscow.
In 2002 the company changed its name from North-West GSM to MegaFon when it acquired several regional companies, becoming the first GSM company in Russia to cover all its territory. The name "MegaFon" in Russian looks exactly like the word for a megaphone; other connotations are mega- as "big" and fon as "telephone".
June 17, 1993 – registration date of North-West GSM CJSC (Saint Petersburg). Alexander Malyshev became the first General Director. The major international investors included Scandinavian companies Sonera (Finland), Telia International AB (Sweden) and Telenor Invest AS (Norway). Telecommunication equipment was supplied by Nokia.
1994 — launch of commercial operation of GSM (2G) network, the first in Russia.
1999 — number of the company’s subscribers became over 100,000. By that time the network of the North-West GSM had completely covered Saint Petersburg and Leningrad region, it was also actively expanding in the northern areas of the Russian North-West.
July 1999 — North-West GSM was the first Russian operator that signed roaming agreements with all countries in Europe. The same year, for the first time ever in Russia, mobile communication started to operate in Saint Petersburg metro, and the operator’s spectrum of value-added services included WAP-access to the Internet.
2000 — shareholders of the company adopted a new strategy that was targeted at the mass market.
November 2001 — number of North-West GSM subscribers exceeded 500,000.
May 2002 — number of North-West GSM subscribers became over 1 million.
May 7, 2002 — in the course of rebranding North-West GSM CJSC was renamed to MegaFon OJSC. Rebranding of the company was started on April 28, 2002 by change of the logo. At that moment , North-West GSM was merged with Sonic Duo CJSC (Moscow), Ural GSM CJSC (Yekaterinburg), Mobicom-Kavkaz CJSC (Krasnodar), Mobicom-Center CJSC, Mobicom-Novosibirsk CJSC, Mobicom-Khabarovsk CJSC, MCS-Povolzhie OJSC, Volzhsky GSM (Saransk, Republic of Mordovia).
On October 2, 2008, MegaFon launched for operation the first Russian fragment of the third generation network in IMT-2000/UMTS (3G) at the territory of Saint Petersburg and Leningrad region. For the first time ever in this country the radio access sub-system UTRAN (UMTS Terrestrial Radio Access Network) was launched for trial commercial operation and included 30 base stations. And already on October 24, 2007, MegaFon announced about start of 3G service in Saint Petersburg and Leningrad region. For the first time in Russia, the following services became available for mass users: Internet access at the data transmission speed that is 10-fold higher than in the existing GSM networks (2G and 2,5G) of GPRS/EDGE technology, high-quality Mobile TV, video communication.
December2008 — the extraordinary General Shareholders Meeting of MegaFon took a resolution on reorganization of MegaFon OJSC in the form of its merger with Sonic Duo CJSC (Moscow), Ural GSM CJSC (Yekaterinburg), Mobicom-Kavkaz CJSC (Krasnodar), Mobicom-Center CJSC, Mobicom-Novosibirsk CJSC, Mobicom-Khabarovsk CJSC, MCS-Povolzhie OJSC. The number of subscribers exceeded 43.2 million.
On March 16, 2009, MegaFon founded a virtual mobile network operator “PROSTO” (Just for Communication) on the basis of the Stolichny Branch.
On July 1,2009, reorganization was completed, and now mobile communication services in Russia are provided by the North-West, Stolichny, Kavkaz, Center, Volga, Ural, Siberia and Far East branches of MegaFon OJSC.
On September 25, 2009, it was announced about rebranding of TT mobile CJSC, subsidiary of MegaFon that provided telecom services under the brand of MLT – “Mobile Lines of Tajikistan”. The new company’s name is MegaFon-Tajikistan.
Since March 1, 2010, Ostelecom CJSC started to provide telecom services in the South Ossetia under MegaFon brand.
In June 2010, MegaFon acquired 100% shares of Synterra company, which was a move to strengthen network infrastructure and enhance the positions in the markets of long-distance communication, fixed and mobile broadband access to the Internet, as well as convergence services.
Three months later, the extraordinary General Shareholders Meeting of MegaFon unanimously approved acquisition of 100% shares of PeterStar CJSC from Synterra.
Based on the results of Q3 2010 MegaFon became the second-ranked operator in mobile revenue.
Based on Q3 2010 results MegaFon became the leader in the revenue share from value-added services (VAS) among the Big Three operators.
As a result of 2010, MegaFon became the Top 2 operator (after MTS) in number subscribers among the Russian cellular communication providers.
As a result of 2010, MegaFon acquired the Top Second position in terms of revenue among the Russian Big Three operators.
On July 20, 2011, it was announced about rebranding of TT mobile CJSC. MLT brand was renamed to MegaFon-Tajikistan.
In November 2011, MegaFon signed a partnership agreement with Scartel on joint development of the Forth Generation networks LTE (Long Term Evolution) in Russia. As a result, the company got the opportunity to provide LTE 4G services using Scartel’s equipment. In its turn, Scartel will be able to use MegaFon’s infrastructure.
In December 2011, the company created MegaLabs, 100% subsidiary, which is the single center of innovative design and prompt launch of value-added services. The new company is focused on fast introduction of advanced products and services to the market (content and media, mobile finance, mobile advertising, clod solutions, М2М, e-government, m-health, etc.) through efficient partnership with well-known market players and young teams of developers. At the same time, MegaLabs is a platform for experimental designs by MegaFon.
Owners and Management
The Company was founded by the largest foreign investors: Sonera (Finland), Telia International AB (Sweden) now merged into TeliaSonera, along with Telenor Invest AS (Norway). Telecom equipment was purchased from Nokia.
The owners of the Company as of March 2011 are as follows:
Jeffrey Galmond, a Danish lawyer publicly claims to own and control Telecominvest, but it is rumored to in fact represent the personal interests of former Russian telecommunications minister Leonid Reiman.
A battle for control of the company is ongoing between Alfa Group and Jeffrey Galmond's party.
Unlike other companies from the Big Three, MegaFon is not a public company, therefore it does not have to disclose all the information on the Company’s business (for example: it does not publish quarterly reports of the issuer of securities).References: Helsingin Sanomat, March 28, 2006   (requires subscription)
Megafon outside Russia
The Georgian National Communication Commission has accused the Russian mobile telecommunications company MegaFon of illegal business operations and participation in the military and economic annexation of Georgia.
According to the GNCC, “MegaFon” has provided unlicensed mobile phone coverage in the conflict zones of Georgia beginning in 2005, in particular – the South Ossetia region. The company covered mostly the areas of dislocation of the Russian military forces present in Georgia under the CIS peacekeeping mandate. The rest of the area was mostly covered by the Georgian mobile phone carriers “Geocell” Ltd. and “Magticom". In the spring of 2008, GNCC received complaints from Georgian mobile communication companies regarding the destruction of their communication facilities in the region and installation of MefaFon antennas. The GNCC conducted survey monitoring trips to establish the presence of MegaFon’s unlicensed coverage. The GNCC has imposed two fines on MegaFon: the first – in the amount of 5000 GEL (3750 USD) in July 2008, and the second, for the recurrence of violation in the amount of 500,000 GEL (approx. 350,000 USD) in September 2008.
Because Georgian law envisages criminal liability for illegal business activities, the GNCC has notified the General Prosecutor of Georgia on the alleged violations committed by MegaFon. The Prosecutor General of Georgia is expected to initiate criminal proceedings against key officials of MegaFon.
On October 2, 2008, Tbilisi City Court upheld the decision of GNCC, finding MegaFon liable for providing unlicensed telecommunication services in Georgia.
MegaFon’s appeal of the second administrative fine shall be heard by Tbilisi City Court in November 2008.
MegaFon's only subsidiary outside Russia is Tajikistan's TT Mobile.
Kommersant reported on September 7, 2006 that MegaFon is negotiating in buying an 85% stake in Uzbek mobile operator Coscom from the MCT Corpation. The other 15% stake in Coscom would be held by Coscom management and private shareholders. Analysts estimated Coscom is worth between USD $180–200 million. Coscom's has over 300,000 customers.
BBC Persian reported on May 13, 2008 that Megafon has opened its office in Tehran.