In December, 2013, China’s Ministry of Industry, Information Technology (MIIT) opened up the country’s mobile network to competition for the first time by issuing Mobile Virtual Network Operator (MVNO) licenses to private firms operating in China. Accenture’s Kuo Pin Ng explains why this signals the beginning of a new era in China’s telco market.
Why is the issuance of the MVNO licenses by the government a ground breaking move?
The previously monopolized market is now open to new players….19 in total! These new entrants are eager to figure out how to launch their MVNO businesses successfully, with some of them already off to an early start in rolling out products. This is expected to drive significant change in the marketplace.
How is the environment different from other Telco markets that have opened up to MVNOs?
The market environment of China in 2014 is anything but similar to the pioneering MVNO market in Europe back in 2000. Today, mobile internet is booming and changing every way consumers behave and the way businesses operate; over the top (OTT) service providers are eating away the traditional voice and text business. This means that the China MVNOs cannot just mimic their global predecessors and achieve success by reselling traditional services to a targeted and niche market.
How can launching an MVNO help a company?
An MVNO can be an enabler by offering an opportunity for a company in any industry to transform itself and become part of the Chinese mobile internet ecosystem. A company can improve existing or build new capabilities by integrating such a Telco capability within its core business. It can help the company drive innovation and industry integration, by building on existing resources and assets (channels, customer base, etc.) and launching a new service offering in another sector. Take Funtalk China Holdings Ltd.; they recently rolled out a mobile health solution -- a totally new service offering in addition to their retail business.
What is the role of the Mobile Virtual Network Enabler (MVNE)?
It plays an important role in the MVNO ecosystem. MVNE service is usually provided by third party organizations, and in some cases by Telco’s themselves. MVNEs can provide a wide array of services including IT capabilities, business process management, and help the MVNOs reduce both their IT investment and operational costs up to 20 percent, and HR expenses by up to 30 percent. In the Netherlands, more than half of the MVNOs operate on MVNE-provided systems and many of the British Telco’s have signed agreements with MVNEs to standardize the way MVNO networks integrate with their own. The market complexity in China will likely drive MVNOs to work with MVNEs.
What impact, if any, will MVNOs have on the traditional operators in China?
Telco’s in China are transforming themselves to better compete in the digital marketplace. While MVNOs can be viewed as industry challengers, they will likely have a positive impact and help the industry in China evolve. Telco’s are already upgrading their pricing plans for example, as well as launching innovative products.