The viability of mobile resellers and virtual network operators in the Middle East continues to be questioned by analysts, though answers are imminent given the impending launch of commercial MVNOs in Oman during the course of Q109. Majan Telecom and Friendi Mobile are the two companies entrusted with proving the business model for MVNOs in the region, and while he remains guarded about the finer points of his company’s market entry strategy, Majan Telecom’s CEO, Niklas Nielsen outlines how his organisation is set to do something never before seen in this part of the world
Niklas Nielsen is confident the MVNO business model will be vindicated in Oman, though he questions the market’s ability to support more than two resellers
Both Class II reseller licensees in Oman know it – being first to market will drastically improve either company’s prospects for success. As a consequence of this, both Majan Telecom and Friendi Mobile are working frantically behind the scenes to ensure their brand name, offering, and association with the latest business proposition to launch in the region since 3G services, hits the market first.
Niklas Nielsen, CEO of Majan Telecom, believes that while the race to launch an MVNO (reseller) first in Oman is significant, when it comes down to it, there will only be a matter weeks – three of four perhaps – between when each player opens its doors for business. However, given the similarity of the profile of people that Majan Telecom and Friendi Mobile are both likely to target – the youth and the cost-conscious – having the opportunity to communicate a message exclusively, and prior to similar market noises being made by a competitor, is invaluable.
“Focus is the key word for me,” says Nielsen. “Ours is a structured approach, backed by thorough research and market analysis. I do want to be first-tomarket, but that does not mean I am going to rush processes in order to achieve that.”
Oman’s regulatory regime with respect to the entrance of resellers into the market, permits the licensees operate their own billing system, Intelligent Network (IN), branded recharge cards, as well as appoint their own distributors. Thus from a subscriber’s perspective, the services offered by Oman’s Class II licensees will stand completely separately to those offered by network capacity provider Oman Mobile, adding two more brand names to the country’s cellular market.
Majan Telecom’s operational brand name is Renna, which means ringtone or ringback in Arabic, and points to the company’s likely focus on price-sensitive segments of the market.
“The logo represents sound in motion which is really what mobile telephony is all about. The designers of the logo are Omani, and I think they were inspired by the representation of sound in motion known from physics as the Doppler Effect,” Nielsen states. “It also represents a focal point, focus, like a tunnel zooming into a single point,” he adds.
While much of both licensee’s market entry strategy is competitively sensitive, Nielsen does reveal that part of Renna’s proposition will be expanding the notion of ‘sharing the moment’, in terms of the delivery of simple offerings and ensuring easy communications.
“Our aim is to be light and easy on the wallet. We are going to create a Renna universe, which offers a connection to friends and family,” reveals Nielsen. “Everything we do will be transparent and straight forward,” he says.
While Oman Mobile is understood to have been genuinely interested in engaging with the five Class II licensees that were selected by the regulator last year, second mobile operator Nawras is reported to have shown littleto- no interest in hearing the potential benefits that tying up with a MVNO may yield. Not only has Nawras been unwilling to engage with the reseller licensees, it has actually embarked upon a marketing campaign of its own, targeting the youth market – a segment likely to be one of the MVNOs’ largest constituencies.
In November Nawras announced the launch of its Shababiah bundle; a youth orientated brand offering services targeted at customers aged between 16 and 25 years of age. Shababiah subscribers can call their community of friends for 29 baizas (US$0.075) per minute and send them SMS for just 9 baizas. Shababiah also comes with free Rannati (personalised greeting service) subscription as well as exclusive mobile news and content targeted at under 25’s. Shababiah offers all these elements and more, for a monthly subscription of 500 baizas.
In an attempt to directly impact the effectiveness of the MVNO launches in Q109, Nawras has offered further concessions to customers who sign up to the Shababiah service before January 27, allowing them to automatically receive three months’ free subscription and RO1 free Internet data usage. Shababiah customers will also be able to use the low community calling and SMS rates for every call and SMS sent to any Nawras customer to January 27th.
“Over the next year we expect to see other new brands and resellers entering the Omani mobile market. We are delighted to launch Shababiah as the first in the market. Based on our detailed research and understanding of the youth market, we are thrilled to be launching this service full of value and excitement, developed by youth for youth,” commented Shababiah’s Nasra Al-Habsi at the launch of the brand in November. Nawras already commands a commendable 46 per cent of Oman’s overall mobile market; a figure made even more impressive given the second operator only commenced commercial operations in March 2005.
While acknowledging that Nawras’ activities in the youth market are an attempt to act as a “spoiler” to the MVNOs’ own launch efforts, Nielsen is confident that his company’s strategy will appeal to Omani customers in a much more personal manner than has been available in the past.
“Nawras is generally perceived as having a stronger hold of the bottom of the customer pyramid, in terms of the amount customers spend. Oman Mobile controls the top-end of the pyramid, but in our research we found that many of the bottom of-the-pyramid customers don’t necessarily see Nawras as the operator for them. These customers are looking to have better prices, better customer service, and simplicity in the product pack,” Nielsen says.
Apart from the battle for mindshare that is set to take place between Renna and Friendi Mobile, it is universally agreed that the main areas of differentiation are set to be – in order of importance – network quality and coverage, price, and customer service. Network quality and coverage is out of the MVNO’s hands as that is an activity that falls under the responsibility of the network operator, so the two resellers are likely to fight intense battles with respect to the bundling of packages as well as their customer service touch points.
“As a mobile reseller or MVNO one cannot do as much with the network, so one will need to communicate the advantages of the other areas of the business that one does have more control over,” Nielsen comments. “We are going to have our own Renna-branded stores that will compliment our third-party retail network and build our brand further.” Fayez Husseini, Friendi Mobile’s senior vice president of business development says his company is in the final stages of testing the service in Oman, and is on course to launch early in 2009, barring any issues arising.
“We already have 12 or 13 people on the ground in Oman working on this, and I must say that throughout this process Oman Mobile has been open and forward thinking. We hope other operators in the region will take a look at the business model for themselves,” Husseini says.
“This is a big step for Oman. Oman Mobile has really embraced mobile resellers, and we have stressed that we are not market destroyers. We shall govern this opportunity responsibly,” Nielsen says, in agreement with Husseini’s remarks.
While as many as six consortia were awarded Class II licences in Oman only two have been able to reach agreement with Oman Mobile and Nielsen believes it is unlikely that the network operator will sign up any further MVNO partners. Given that Nawras remains unconvinced of the merits of partnering with an MVNO, it is unlikely that it will sign such an agreement in the medium term, and even if it were, the prospects for success of a third MVNO in Oman appear limited at best.
However, some analysts question the basis of even a single MVNO successfully operating in the Middle East region. Mark Newman, chief research officer of Informa Telecoms & Media in London believes the virtual operator model in this part of the world is unlikely to succeed as a long-term proposition.
“I’m not convinced there is anywhere in the world that the entry of MVNOs has heralded a significant improvement in market conditions beyond what the network operators could themselves deliver,” Newman says.
100,000 subscribers is typically viewed as a MVNO benchmark with respect to viability, and Nielsen remains confident that the Omani market will be in a position to viably support more than one MVNO in that particular market. And while this benchmark may differ from case to case with respect to variations in ARPU, subscriber acquisition costs and wholesale rates, Nielsen remains surprised that there are people who doubt the prospects of a reseller in Oman being capable of gaining 100,000 subscribers within a five-year period.
With a population of a little over three million, Nielsen previously estimated the total size of the addressable market for mobile communications in Oman at more than two million people.
“Normally you say that MVNOs are able to reach a combined market share of 20 per cent dependent on the size of the market and number of players. This leaves around 300,000 subscribers to the reseller space,” Nielsen commented. He also forecasts that his company will be profitable within a few numbers of years, offering the best response possible to operators and market commentators who questioned whether the introduction of service-based competition of this nature was ever going to be sustainable in the Middle East.
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