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Local circumstances drive price/ product strategy for multi-country MVNOs

Several larger MVNOs have developed internationally in recent years, hoping to benefit from increased scale by operating in multiple countries. Given the differences in local market conditions though, how much does a multi-country MVNO have to adapt its products and pricing strategy to each country? In this article, we look at the strategies of international MVNOs Lycamobile, Mobile Vikings and Virgin Mobile and how they expanded from West to East Europe. While there are still opportunities for growth, especially in providing data services, MVNOs need to respond correctly to the local market needs.

Several MNOs have expanded from their Western European bases to Eastern Europe in order to seek new growth markets, so it makes sense MVNOs will follow. To date, there are only a limited number of MVNOs active in both Western and Eastern countries, with little overlap in terms of the countries where they operate. For this article, we decided to look at Lycamobile (active in 14 western and 4 eastern European countries), Virgin Mobile (active in 2 western countries and Poland) and Mobile Vikings (Belgium and Poland). One Eastern European country in common is Poland, so we focus on this relatively more mature MVNO market and also look at Ukraine, an undeveloped and upcoming market.

Poland: large number of MVNOs, but low penetration. Market moving fast to big data plans and postpaid

Eastern Europe is not as well developed in terms of MVNOs as Western Europe. An exception is Poland, where over 20 MVNOs are active. However, their penetration is still low, with less than 5 percent of Polish Sims with MVNOs in late 2016, according to a Communications Committee report.

Poland can be characterized as a country where fixed broadband lags the EU average. In contrast, 4G mobile broadband coverage is well above the EU average. This has driven the introduction of ever-bigger and in some cases, unlimited data bundles by MNOs and most larger MVNOs, similar to Western European countries. MVNOs such as Lycamobile are following a similar strategy to their more mature markets, moving to all-in national plans in order to appeal also to ‘non-ethnic’ people and transition from a second SIM to a first SIM player. A big difference though is bundles with similar content to a Western European country like the Netherlands tend to be almost 50 percent cheaper at Lycamobile Poland (no correction for purchasing power parity).

Mobile Vikings is a good example of a data-oriented MVNO that adapts its strategy to local country conditions. An increasingly postpaid market in the Netherlands led the prepaid-focused company to exit the country after three years at the end of 2015. In Belgium, where the MVNO first started in 2008, the MVNO adapted better and introduced postpaid plans in 2015. In Poland, it’s following the market trend with much bigger data bundles (largest plan 25GB including unlimited minutes and SMS versus 8GB with no minutes included in Belgium). In terms of price it is also 40-50 percent cheaper in Poland compared to Belgian prices. Mobile Vikings recently started offering more data only bundles in Poland, with up to 80GB for only EUR 10.50 (valid for 30 days) and rolling over unused data to the next month. However, the same as in Belgium, the company must deal this year with a new law requiring registration of prepaid SIMs.

Virgin Mobile is a much more international MVNO brand, active in countries including Australia, Colombia, the UK, Canada, Chile, Saudi Arabia, South Africa, México, the US and most recently the UAE. In Europe it operates in the UK, France and Poland. Poland was its first country in the CEE region, launched in August 2012. It targets mainly the youth/ millennials segment with bundles at transparent prices. Also with this MVNO, plans in Poland tend to be larger in volume, particularly in prepaid (up to 20GB for EUR 11.40). Extra benefits in Poland include zero-rated data for apps like Twitter and Facebook, something also offered by MNO T-Mobile. Virgin Mobile also introduced postpaid plans in Poland early this year ahead of the start of prepaid registration requirements.

Ukraine: large market, data revolution just starting

While Poland is already maturing similar to West Europe, other countries in Eastern Europe such as Ukraine, Croatia and Slovakia are more under-developed due to slow 3G/4G roll-outs. Players in these markets are competing more on basic prices, and the data bundles market is still in early development. MVNOs already active in West Europe can build on their accumulated expertise and capitalise on the demand for affordable data packages in these countries.

Ukraine in particular has significant pent-up demand, as 3G networks were only launched in 2015. MVNOs are rare in Ukraine, but are likely to become more common as MNOs seek a return on their investments in 3G and prepare for the start of 4G. Lycamobile was one of the first MVNOs to launch in Ukraine and is offering already all-in national bundles, similar to its other countries. However, the company faces a challenge in getting Sims into customer hands, as Ukraine already has a mobile penetration of 144 percent.

This shows that while Eastern Europe offers opportunities for growth, MVNOs need to focus on value-added services in order to win a piece of the market.

This article expresses the opinion of Telecompaper.

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