Case Study: Oman MVNO

Background

The Sultanate of Oman is located on the Arabic Peninsula in the Middle East. It is in a key location at the entrance to the Arabian Gulf and acts as a gateway to India and South East Asia.
Until 1970 the country was under-developed but, after the current Sultan took over as ruler, the country has progressed steadily. Oman has oil as one of its main sources of income but is focusing on developing other sectors including tourism-amongst the Gulf countries Oman is often highlighted as a country of particular beauty and tranquility.

Oman Demographics

The telecommunication sector has also progressed – partly due to Oman’s Free Trade Agreement with the US – and Oman stands out as being the first country in the Middle East to open for MVNOs.

  • GSM services established in 1997
  • Organizational separation of Oman Mobile from Omantel since May 2004
  • Second GSM license awarded to Nawras (now Ooredoo) in June 2004
  • 3G services launched in 2007
  • 4G (LTE) services launched in 2013
  • First MVNOs launched in May 2009
  • Total mobile subscribers: 6,194,169 (2014)
  • Mobile penetration: 155% (2014)
  • Prepaid share of total mobile subs: 91.5% (2014)
  • Mobile services ARPU: 7.75 OMR = ~20 USD (2014)
  • Total number of active Mobile Broadband subscribers: 2,893,561 (2014)
  • Mobile Broadband penetration rate: 72%

The introduction of MVNOs in Oman

In 2007 Oman’s telecommunication regulator (TRA) took steps towards the introduction of MVNOs. They involved the two licensed mobile network operators – the national incumbent Oman Mobile and challenger Nawras owned by the Qtel group (now Ooredoo) – and by the end of 2007 TRA had issued a license framework for MVNOs.
This kicked off a beauty contest amongst 8-10 consortia who all expressed their interest in signing an MVNO agreement with Oman Mobile or Nawras.
Oman Mobile and Nawras took different approaches to this. Oman Mobile decided that since it seemed that it was TRA’s clear intention that MVNOs must be launched in Oman, it was better that they embraced the concept and make use of it. They weighed the potential extra competition and erosion of its own market shares against the additional traffic, subscribers and revenue that the MVNOs could bring to their wholesale unit, and concluded that MVNOs’ potential to increase their business was significant and decided to embrace the MVNO model.
Nawras, on the other hand, attempted to resist the MVNO process. As a result the two strongest consortia – Friendi Mobile and Renna Mobile – signed up with Omantel in the 1st quarter of 2009 and only later did a reluctant Nawras  make deals with the remaining consortia which ended up leaving the market a short time later.
As we will hear in the coming sections, the result was that Oman Mobile managed to reverse the trend of declining market shares that had been the situation since Nawras’ launch in 2005.

Oman Mobile’s strategy towards MVNOs

Positioning Matrix

The Middle East's first-ever MVNO, Friendi, launched in April 2009, soon followed by the second, Renna Mobile in May 2009.
Their partnerships with Oman Mobile are based on a “retail minus” or similar to a revenue-sharing model, with Oman Mobile receiving a different percentage of the MVNOs’ revenue for each type of service with preset discounts when the MVNOs reach specific traffic volumes.

Oman Mobile took a clever approach to the way they selected and negotiated with the two MVNOs focusing on working with them to attack market segments that were regarded by Omantel as:
1.    Market segments that were not core segments for Oman Mobile, and

2.    Where their main competitor Nawras was strong.
In this way, Oman Mobile could use their own internal resources and focus on retaining and building their customer base on their own core market segments while letting their MVNOs fight for them in other segments and gain market share*.

Omantel have subsequently stated the following key achievements of their partnering with MVNOs:

  • Demonstrated Omantel’s intention to develop the telecom sector in Oman.
  • Minimized the risk of new direct competitors
  • Gained network market share (with no Subscriber Acquisition Cost) while slowing down the competitor’s growth
  • Addressed specific/niche market segments through MVNOs
  • Introduced a new business stream via Wholesale operations
  • Assisted in the development of healthy and sustainable MVNOs
  • Utilized idle network capacity on Omantel network.
  • Became a “case study/example” of MVNO success.

Renna Mobile

Renna Mobile 1

Renna Mobile (legal name: Majan Telecommunication LLC) was established in 2007 when the Oman regulator TRA announced the license framework for MVNOs.
Renna Mobile launched in May 2009 with a focus on cost conscious parts of the population including low income expatriates and non-affluent Omanis. Services were tailored to the intended market positioning.

Renna Mobile Value Proposition

Omantel MVNOs
In June 2011 Renna was the first MVNO in Middle East to reach operational break even (EBITDA) and by April 2015 Renna Mobile had approximately 5% overall market share. At the time Renna was the fastest growing mobile telecommunication service provider in Oman.

MVNO – a game changer for Oman Mobile

Oman Mobile’s own view is that the introduction of MVNOs on its network has been a game changer, with a significant value-add for the company.
The numbers also speak for themselves and clearly show that Oman Mobile’s MVNOs have had a positive impact on Oman Mobile’s total network market share as well as its wholesale revenue.

Omantel MVNO value-add

Omantel MVNO impact

 Sources outside Omantel have noted Omantel’s successful use of MVNOs and their positive impact on its business.

Embracing MVNOs

Nawras’ mother company, the Qtel Group (now Ooredoo Group), made a remark in their financial report from Q1 2012 that Omantel’s MVNOs had had an impact on Nawras’ financial performance.

Revenue impact

Conclusion

The evidence of the Oman experience demonstrates that a successful implementation of MVNOs can be a significant game changer for the Host Network Operator.

  • After Nawras launched as Oman’s 2nd GSM operator in 2005 Omantel’s mobile business unit saw 15 consecutive quarters of declining market share
  • But after Omantel’s MVNOs – Renna Mobile and Friendi Mobile – launched their operations in April/May 2009 Nawras’ market share has declined steadily each quarter
  • By the end of 2014 Omantel’s market share, including the MVNOs attached to its network, was 59%. The MVNO’s of Omantel contributed a combined market share of 12% (or 20% of the total of Omantel’s reach) to this figure.
  • Omantel’s wholesale revenue from the MVNOs has increased steadily since the MVNOs’ launch, adding further testimony regarding MVNOs’ positive impact on Omantel.
  • Both Renna and Friendi are profitable. and Renna, is now the fastest growing mobile operator in Oman. This clearly shows that the MVNO business model is working and sustainable in the longer term.

A mobile network operator can use MVNOs as a strategic value-add to their operations, resulting in stronger operational and financial performance, higher returns for their shareholders, as well as an increased number of jobs in the sector with a positive impact on the society in general.

* Some of the points made in the remainder of this document are taken from a presentation made by Yasser Redha Al Lawati, Manager, Wholesale National Accounts at MVNO Summit Middle East, 24 Sep 2013.

Slides on Slideshare