Tele2 says MVNOs support client base, MegaFon, Beeline sceptical

MOSCOW, Apr 18 (PRIME) -- While mobile operator T2 RTK Holding can boast over a million mobile virtual network operators (MVNOs) clients, who it says cement the subscriber base and cut the churn rate, large carriers MegaFon and VimpelCom are sceptical.

“We are actively working with MVNOs. This is our deliberate choice, an element of strategy, not a toy. We seriously invest and believe in it. The reason is simple. Now all high-tech products that surround us are becoming more complex and numerous. Their lifespan is becoming shorter. There are smart homes, virtual realities…It is all complicated, but the client wants it to be simple,” said Igor Maistrenko, director for sales and mass segment development at T2 RTK Holding, working under the Tele2 brand.

“There are many firms that can cover a niche better than large operators. A large operator can have one or two serious offers and five products on the shelf…We think that this is not the whole range of segments that the subscriber needs. There are football fans, those who love Barbie dolls, lots of communities who wait for a unique offer, and in our view, partners can do it.

“It’s a serious part of our business. It is not detrimental to our core business. We always care about our margins,” he said at the Telecom Forum, organized by business daily Vedomosti on Tuesday.

T2 RTK Holding’s MVNOs working on Tele2’s network have more than 1 million subscribers without whom it would have some 200,000 customers, Maistrenko said, adding that T2 RTK Holding does not count MVNO subscribers in its own base.

State-controlled telecom giant Rostelecom, is a 45%-owner of T2 RTK Holding, and it also has an MNVO. “We launched an MVNO in 2016 and in 2017 we accumulated a good base for a virtual operator in Russia,” Alexei Chernetsov, director of the MVNO project office at Rostelecom, said.

“This base ensures our success and coherence with our existing products, because Rostelecom is mainly known as a fixed-line operator…We sell mobile services, convergent products to our fixed-line customers. As a result, it’s a kind of a layer-cake that allows us to cement the subscriber base. In the future, we hope the outflow of clients from fixed-line telephony will be compensated by mobile clients,” the executive said.

The churn rate declines because clients get some products with discounts, and the average revenue per user rises.

MegaFon, the owner of Yota, “which had been undermining the market by its limitless (Internet) and accumulated a large loyal base, as well as multi-million expenses,” monitors the MVNO market, Vlad Wolfson, chief commercial officer at MegaFon, said.

“We have unsuccessful projects, like VK Mobile. We thought and tried to create an MVNO with the largest social network in the country (VKontakte). It turned out that the power of a brand is not always linked to connection services. There is no direct association between the name of a social network and connection services,” Wolfson said.

“We have a successful example, Gazprom Telecom, which is one of our first MVNO projects …Still, we don’t believe in an (MVNO) factory …We don’t believe it’s a long-term story that is profitable for a big operator.”

Artashes Sivkov, executive vice president at VimpelCom, known as Beeline, said that the first MVNOs in the world date back to the early 2000s. They peaked in 2010 in Western Europe to count 110 trying to use different strategies and occupy market niches in 2010–2011. There number plummeted to 20–25 MVNOs now.

“These were strategies of disruptive prices, when an operator ruined the market with its price offers and tried to build its business model on the fact that it would create a high-quality base quickly to monetize it,” Sivkov said.

“There were niche strategies allowing users to enjoy preferences not linked to connection operators. There were interesting solutions linked to technological components. We do not see a single virtual operator in the world with a market share of over 5%.

“The operators who used a low price model earned nothing. These were lost investments or quasi-subsidized models supported by a parent company, which wrote off the losses and made the story invisible for the external market.”

The MVNOs that created some value were successful, for example the U.K.’s Lebara for international communities and migrant workers.

“As to the Russian market, it is an interesting story in a narrow niche with a service provided to a limited group of people, like migrants or football fans. Successful examples had value, like a call center in the Uzbek language or discounted match tickets for football fans,” Sivkov said.

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