1. Implementing a attractive Wholesale offer for MVNOs:
converging diverse needs
For information please contact: marco.gatti@svpadvisors.com

2. About us
–SVP Advisors is a management consulting firm
specialized in Business, Financial and Regulatory
Strategy
–SVP Advisors is recognised leader in strategic
costing
–Our team have more than 20 years experience in
the communications and financial sector
“Creating value in a flat world”
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3. 3
Our track record
•Euskaltel (MVNO, Spain) •EETT (Greece)
•Jazztel (MVNO, Spain) •CMT (Spain)
•Tesco (MVNO, UK) •Telecom Italia (Italy)
•Telefonica •OFCOM (Switzerland)
•Navento (Spain) •COFETEL (Mexico)
•Aquamobile (Spain) •AGCOM (Italy)
•diAx (Sunrise,
Switzerland)
•Dubai Holding Business &
Regulatory
Corporate
Strategy
strategy
Regulatory
New Venture
cost modelling
Launch
Operational
Support in
and tariffs •Telefonica Deutschland
Corporate
benchmarking •AOL
•Blackstone Finance •TPSA France Telecom
•Permira Market (Poland)
Due diligence
•Citigroup bechmarking
•Inter-American
Development Bank
•Virgin Play
•Oger - Turk Telekom
* It includes relevant customers from SVP Advisors and its employees
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4. Agenda
1. Introduction
2. The MVNO Model: case studies
3. The Hate then Love relationship
4. The Wholesale Offer
5. Conclusions
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5. 5
1 Introduction
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6. 6
The MVNO market is characterised by strong competition that
drives margins down
In the first year MVNOs usually don‟t capture more than 2,5% of market share,
their maximum market share in mature markets is 25%
EU MVNO benchmark (SVP Advisors estimates as of Jun 09)
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Experience shows how important adaptation is, a wholesale offer
has to change with the market
Marked
is
crowded
Germany
Italy Netherlands
Spain France
UK
High
growth
Switzerland
Maturity:
Growth „Only a few survive‟
Denmark
Ireland
Early Oman
penetration
Turkey
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An effective wholesale offer can be produced only by defining,
adapting and converging different needs
MNO MVNO
Preserving the Other MVNOs Business
Commercial
Status Quo vis a vis me Model
Evolution not revolution Acquiring my space and
identity
Competition
Financial
activities Financial /
My Prospective
Investors
Regulatory
threats
Target
Market
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The Hate, then Love evolving
2
relationship
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The relashionship between MNOs and MVNOs evolved gradually
during the last two years
The transformation in relationships between MNO and MVNO is the result of more intense competition
between MNOs in getting the best/most successful MVNOs, and the seek for new revenues streams
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… MVNOs wholesale offers depends on momentum MVO’s Vision
 “A firm should view its suppliers, customers,
rivals and potential new entrants as competitors”
(Porter 1990)
 “Competitive advantage comes from owning
unique, valuable, inimitable, non-substitutable
capabilities” (Lippman and Rumel, 1982)
 “Competitive advantage can be eroded by
technological change” (Tushman and Anderson,
1986)
 Competitor advantage also can come from co-
opetitors (Nadar, 1996), suppliers, customers,
complementors and alliance partners.
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Thus, the initial gaps between MNO and MVNOs expectations are often
the cause of an unsuccessful wholesale and MVNO offer
MNO MVNO
 Initially with little interest in producing a First mover advantage: the first
successful wholesale offer MVNO in the market wins
MVNOs commercial non-regulated
 Non-discrimination obligations can foreclose offers that permit higher margins
competitive offers than competitors, but also fair rates
to compete with MNOs
“MVNOs are champion of nice
 Lack of knowledge of the market markets!” - not always true
The best partner is not only the one
 Looking for the best partner with the lowest price, but also the
best service
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THE WHOLESALE OFFER:
4 BUILDING THE OPORTUNITY
FOR MVNOS
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The final wholesale offer is often the result of the combination of
several interdependent factors
COMPETITORS COMPETITORS
MVNOs
NETWORK
MARKET STRUCTURE MARKETING
AND SALES WHOLESALE
CHARACTERISCS STRATEGY OFFER
FINANCE
REGULATORY DTP
REGULATORY
AUTHORITY
COMPETION
AUTHORITY
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PRODUCING A WHOLESALE
4c
OFFER
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there are three possible options available for calculating wholesale
rates for MVNOs
 RETAIL MINUS: Positive:
1. Best practice in Europe
2. Easy to implement
• Calculated from retail price minus avoidable Negative:
retail costs for the different kinds of MVNOs 1. What Retail rate?
2. Might be seen as anti-competitive
practice
Positive:
 COSTS PLUS: 1. Complex to implement
2. Cost can be traced and profitability evaluated
3. Non discrimination proved
• Offer entirely based on costs
Negative:
1. Complex and time consuming
 MARKET PRICE
Positive:
1. Easy to implement
• When other operators have set the market 2. Common in light regulated markets
price
Negative:
1. Non transparent and discriminatory
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RETAIL MINUS
• Avoidable costs: costs avoided with the sell at
wholesale instead of retail
• It preserves a reasonable gross margin for MVNO
Retail even if market chanes
• The margin is included
Network
p MVNE
• What kind of retail rate?
Network
– Nominal Single / Multi Tariffs or ARMU
Operations
Overheads
- Most common
- Basket of tariffs
- Average
– Flat tariff / max. consumption
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ARMU the most common methodology for RETAIL MINUS in voice
• Important issues to consider:
– ARMU calculation (allocation of
revenues)
– Average ARMU or per direction
– Relevant period (1 month,
average six months)
Selection of tariffs, basket or all tariffs
– Preserve confidential information
but have transparency
• For other non-voice services nominal
tariffs are generally used, because
of less differentiation between
ARMU for the basket and directions
retail tariffs
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19. Major Avoided Costs: per type of MVNO
A list of services, functions and network equipment that is avoided
with the MVNO is usually prepared, costs are retrieved per function
Marketing
Sales
Operations
Network functions
Taxes
Illustrative list
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The selection process continues in the accounts to select avoidable
costs
Determination of what is avoidable (in part or total)
Determination of Services Provided by MVNE
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COST PLUS…
Essential to a highly regulated environment, even if not used for pricing…
 includes costs for network and operational functions that are
rented by the MVNO
 usually preferred by MNOs for full MVNO offers when regulation
requires cost-based MVNO wholesale rates
m
 it is possible that for some tariffs and type of MVNO margins
are higher than they are with retail minus
c
 gives complete control on profitability of products
 needs very high level of granularity on accounts, ideally an
accounting separation system
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5 Conclusions
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Conclusions
1. Innovation and differentiation proved to be best business models
in EU for many MVNOs
2. The right “partner” is key for success, it is a two-way truth
3. MVNOs can give precious intelligence to the market, exploiting
new opportunities
4. Wholesale offers should change as the market evolves, meaning
that control on costs is essential
5. Wholesale offers are dependent on major external and internal
factors
6. MNOs should be aware of their costs and profitability to adapt to
the internal and external environments
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Please contact:
Marco L. Gatti
marco.gatti@svpadvisors.com
Thank You, Company Address (main offices):
Any Questions? C/ Almagro 15, 5th floor
28010, Madrid
Spain
Telephone number (direct):
+ 34 6 688 600 16
Fax number:
+34 91 141 28 11
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