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Valtech Services for

Mobile Virtual Network Operator (MVNO)


Mobile Virtual Network Enabler (MVNE)
Dirk Rejahl, Head of Business Line Telecommunications, Valtech GmbH

Abstract
The mobile virtual network operator (MVNO) business model is currently a widely discussed topic in the
industry. For many companies it is the ideal model for a sustainable and profitable extension to their
business.
Even for small and medium sized companies, the introduction of a MVNO business model is a good
opportunity to position themselves in the mobile telecommunication market with a target-group specific
offer.
This paper briefly explains the MVNO and MVNE business models and outlines proposed solutions.
The basic challenges are associated with the integration of business processes and systems. Due to our
unique approach and deep industry and technology know-how, Valtech is the optimal consultancy and
implementation partner for this task.

About Valtech GmbH


Since 1993, Valtech has worked on more than 1,000 projects and helped improve the competitive posi-
tion of companies including Vodafone, BMW, Air France, Sydbank, AXA Group and ThyssenKrupp.
More than 1,100 consultants and IT specialists in 8 countries supported these companies in planning
and implementing integrated IT solutions to optimise business processes.
In the telecommunications industry, Valtech focuses on customer-related business processes and their
mapping on web portals, as well as on the technical integration of system and domain spanning busi-
ness processes such as order fulfilment and provisioning processes.
Val tech's DuoShore concept offers distributed software development and quality assurance via global
sourcing (e.g. with Valtech India).

Contact
Valtech GmbH
Am Wehrhahn 39
D-40211 Duesseldorf
Tel: 0211 - 179 237-0
Fax: 0211 - 179 237-19
E-mail: telco@valtech.de
Web: www.valtech.de

White Paper March 2006 © Valtech GmbH 2006


Content
1 The MVNO business model in a shifting market............................................................. 3
1.1 MVNO business models............................................................................................................... 4
1.1.1 Reseller............................................................................................................................ 4
1.1.2 Service Provider-MVNO (SP-MVNO) .............................................................................. 4
1.1.3 Enhanced Service Provider-MVNO (ESP-MVNO) .......................................................... 4
1.1.4 Full-MVNO ....................................................................................................................... 4
1.2 Established and future cooperation models................................................................................. 5
1.3 Mobile Virtual Network Enabler (MVNE)...................................................................................... 6
2 Critical success factors for MVNOs ................................................................................. 7
2.1 Choice of the business model...................................................................................................... 7
2.2 Integration of business processes ............................................................................................... 8
2.3 Technical integration with the cooperation partner ...................................................................... 9
2.3.1 Setup of mobile subscribers ............................................................................................ 9
2.3.2 Charging for mobile services ........................................................................................... 9
2.3.3 Complaint management and SLA monitoring.................................................................. 9
2.3.4 Provision of own products and services .......................................................................... 9
2.3.5 Online business und online cooperation........................................................................ 10
3 Valtech Service Offering ................................................................................................. 11
3.1 Value proposition of the Valtech approach ................................................................................ 11
3.2 Business process and system integration.................................................................................. 11
3.2.1 Definition and integration of business processes .......................................................... 11
3.2.2 System integration ......................................................................................................... 12
3.3 Online business.......................................................................................................................... 12
3.4 Mobile portals............................................................................................................................. 13
4 Glossary............................................................................................................................ 14

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1 The MVNO business model in a shifting market
During the last couple of years, the European mobile telecommunications market has shifted from a
growth market to a saturated market.
At the same time, mobile network operators have concentrated on developing their international busi-
nesses. As a result of increasing cost pressures, these providers will, in future, focus more and more on
products that will be accepted by as many customers as possible in an international environment. Ad-
dressing small and medium sized customer segments and competing on specific services are taking a
back seat.
Also the rules of the game are changing, and innovative business ideas are required to achieve effective
growth.
This is why mobile network operators in Europe are searching for new ways to develop - at least indi-
rectly - unaddressed customer segments. These customer segments are typically found beyond the
primary target market, and thus are hard to reach with the operator’s existing brands and products.
On the other hand, mobile telecommunications is a particularly profitable business that, owing to its re-
gulatory conditions, has been accessible only to a small number of market participants.
If the high barriers to entry, including legal and regulatory constraints and large investment require-
ments, could be overcome, many companies would be interested in entering this market.
The "mobile virtual network operator" (MVNO) business model allows a mobile network operator (MNO)
to give other companies access to its network infrastructure, to set up participants on the network, offer
them services and charge these services to the customer.
MVNOs can provide customers with their own SIM cards and receive their own network destination code
(NDC).
Customer relations are managed by the MVNO and the subscribers are anonymous to the MNO.
Many European mobile network operators plan to accelerate the development of new markets and cus-
tomers via cooperation with MVNOs

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1.1 MVNO business models
There are different MVNO business models that vary in their degree of vertical integration.

Figure 1: The primary value-added chains in mobile telecommunications

There are 4 categories of business model that are referred to as MVNO models:

1.1.1 Reseller
In the reseller model the MVNO resells mobile services, typically prepaid contracts. The customer rela-
tionship, however, is usually maintained by the MNO, which means that the MVNO hands the customers
over to the MNO.
As the customer relationship is established between the MNO and the end customer, the reseller is not
an MVNO in the actual sense.

1.1.2 Service Provider-MVNO (SP-MVNO)


Similar to the reseller model, the service provider offers its customers the MNO’s mobile services. In
contrast to the former, however, the customer relationship is maintained between the MVNO and the
end customer.

1.1.3 Enhanced Service Provider-MVNO (ESP-MVNO)


In the enhanced service provider model, the MVNO offers its customers not only the mobile services of
the MNO (typically wholesale products like SMS, MMS, LBS etc.) but its own value-added services as
well.

1.1.4 Full-MVNO
The full MVNO only uses the MNO’s radio network. The MVNO provider operates its own core network
and offers its customers a product and services range that is completely independent from the MNO.

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1.2 Established and future cooperation models
The existing “MVNO-like” business models are usually reseller models in the prepaid segment, which
means the MVNO sells branded SIM cards with handsets or other terminals via its own distribution
channels. Here, the actual mobile subscription contract is usually accomplished between the MNO and
the end customer. This model has the benefits of comparably low initial investment and low risks, but it
can only add limited value – and thus margins remain low.
Using today’s reseller models, companies will find it difficult to gain advantage based on key differenti-
ators. Due to the low level of integration, offers such as target-group specific products and services can
be realised only to a very limited degree. Normally, only special tariffs are possible.
Another disadvantage of this model is the missing (or extremely intricate) migration path to models with
a higher degree of vertical integration, as this would involve changing to a post-paid model. Such a
change is hardly feasible since in the system landscape of a mobile network provider (and usually in the
business processes as well) prepaid and post-paid are completely different from each other.
This is the reason why future MVNO cooperation will tend to focus on post-paid models. Business mod-
els should thus provide for connection to one or more SP MVNOs.
An MVNO does not have a net infrastructure of its own. It has neither a radio network nor a core net-
work. In the ideal case, it will be connected to the MNO’s OSS, which means to its telecommunication
network. The connection is made via two defined interfaces, one to provisioning (the setup of partici-
pants) and one to CDR collection/mediation (the capture of usage data).
Thus, the MVNO does not have to operate its own telecommunication infrastructure but “simply” needs
to integrate customer management and accounting processes with its existing business processes and
realise the technical connection to the MNO’s interfaces.
The MVNO can offer post-paid contracts with its own tariff models and concepts on the market. In addi-
tion, the MVNO can also offer value-added services that do not require an own OSS infrastructure: for
example, intelligent network components.
It can therefore offer target-group specific products and services that enable competition-differentiating
positioning on the mobile telecommunication market.
Future MVNO cooperation agreements will therefore show a higher vertical integration of the MVNO.
The technical integration depth, however, will usually not reach that of a full MVNO that operates its own
telecommunications infrastructure.

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1.3 Mobile Virtual Network Enabler (MVNE)
The mobile virtual enabler (MVNE) company addresses business process domains from the mobile tele-
communications value chain that the MVNO cannot map or does not want to map itself.
A typical domain taken from an MVNO is billing. A similar business model, that of the billing service pro-
vider, has already been established in fixed network communications, particularly in the regional carrier
market segment.
However, the MVNE can also take processes from the application & service delivery or customer care.

Figure 2: The MNVE in the value chain

It can be quite attractive to MVNOs to outsource parts of the business process to an MVNE, as no spe-
cific know-how has to be built up and there is a lower commercial risk in comparison to the MVNO realis-
ing its own business process operation.
In principle, this advantage has to be balanced against additional integration complexity and a potentially
limited agility of the MVNO.

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2 Critical success factors for MVNOs
An MVNO has to contend with the following critical success factors when entering the mobile telecom-
munication market:
 Time-to-market
 Low entry and operating costs
 Choosing the most suitable business model and the associated integration depth in the value chain
of mobile telecommunications
 Possibly lacking know-how on mobile telecommunication processes and business models
 Integration of “new” customer processes with the existing CRM process model
 Technical integration with the cooperation partner

Apart from choosing the business model, the basic challenges are the integration of the new business
processes and systems with the MVNO’s existing process and system landscape, and the management
of costs and risks.
It is also imperative to choose a course of action that allows step-by-step entry to the market and valida-
tion of basic assumptions regarding the business success and the impact on the existing business seg-
ment at a very early stage.
Additionally, the first commercial start should be made as soon as possible in order to receive early
feedback. Systematic feedback cycles make it possible to include the commercial and technical experi-
ences when realising the next step. Thus, costs and success risks are controllable at any time.

2.1 Choice of the business model


Choosing the right business model is the primary determinant of success or failure of the project.
This includes defining which MVNO model should be targeted, meaning the vertical integration and the
integration depth in telecommunications’ value chain.
Due to an MNO’s typical system and process landscape, the choice of either a prepaid or post-paid
model is also required at an early stage (see also chapter 1.2: “Established and future cooperation mod-
els”).
Choosing the business model usually requires a feasibility study carried out together with the potential
MNO. Amongst others, the following aspects of the potential cooperation and business model should be
highlighted by this study:
 Choice of the MVNO business model (from reseller to full MVNO)
 Choice of either prepaid or post-paid model
 Definition of the target market and identification of core products
 Outsourcing of business processes to an MVNE

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Both the business processes that have to be defined and integrated with the MVNO’s existing “business
process world” and the systems’ technical integration needs can be deduced from the choice of busi-
ness model and its resulting vertical integration.

2.2 Integration of business processes


The following business processes of the MVNO – adapted to the specific business model – have to be
defined and integrated with the existing business processes:
 Marketing and sale of mobile services and products
 Innovation and product management
ƒ Definition of tariffs and services
ƒ Definition of offers on terminals, packs and accessories
 Order management
ƒ Activation of subscribers and setup of booked services (provisioning)
ƒ Sale of handsets, other terminals, and accessories
ƒ Websales / POS
 Customer care
ƒ Customer management
ƒ Contract management
ƒ Complaint management
ƒ Up- and cross-selling / marketing of products and services to existing customers
 Mediation / rating / billing
ƒ CDR collection
ƒ Linking of rating and billing systems, respectively to billing service providers
 Accounting
 ERP Integration for debtors management / collection / account receivables
 Misuse detection
ƒ Fraud detection & prevention
 Number & SIM inventory management
ƒ Administration of the mobile subscriber integrated services digital network number (MSISDN)
ƒ SIM-management

The basic challenge is that the MVNO is usually unfamiliar with these business processes and the im-
pact of integration with existing business processes is difficult to evaluate.
Thus, industry-spanning process know-how on telecommunications and on the core industry of the
MVNO is mandatory.

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For the integration of business processes, the service level agreement (SLA) and the realisation of the
corresponding monitoring and escalation processes are absolutely necessary in order for the MVNO to
give and meet quality warranties given to its customers

2.3 Technical integration with the cooperation partner


As the MVNO’s business processes are usually system-spanning and strongly geared to the existing
business processes, one of the major technical challenges is the integration of the IT systems. Typically,
this is a strongly heterogeneous system landscape that partly contains legacy systems as well.
With MNOs we typically find a systematic mapping of the business processes that does not show open
interfaces at the necessary places.
The following chapters describe the categories of these technical interfaces between MVNO and MNO
or MVNE and MVNO that have to be realised.

2.3.1 Setup of mobile subscribers


There are usually no standardised interchange formats for order and provisioning data that include all
tariffs and additional services, especially for the setup of mobile subscribers.
On the other hand, it is absolutely necessary to build a secure high-performance system interface for
provisioning between the MVNO and MNO.

2.3.2 Charging for mobile services


In a post-paid model, there has to be a suitable point in the billing chain of the MNO where the con-
sumption data (CDR) of the MVNO’s end customers can be extracted.
This is necessary in order for the MVNO to settle accounts for mobile services with the end customers.
However, internal accounting also needs this data to be able to trace the accounting between MVNO
and MNO.
The CDR has to be pre-processed, and converted if necessary, and transferred to the billing systems of
the MVNO or the MVNE.

2.3.3 Complaint management and SLA monitoring


For the MVNO’s complaint management, suitable interfaces have to be built and connected to the com-
plaint management system of the MNO, in order to avoid technical complaints from MVNO customers
coming to nothing. Furthermore, the integration of suitable interfaces is necessary for measuring SLA
compliance parameters and for escalation in case of an SLA breach.

2.3.4 Provision of own products and services


If the MVNO wants to offer its own services as an ESP-MVNO or full MVNO, it needs a suitable service
platform that provides these services and transfers the consumption data to the accounting systems.
Since these services are usually attached to the MNO’s basic services, corresponding interfaces to the
MNO have to be developed.

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2.3.5 Online business und online cooperation
In many MVNO business models, internet portals are an important – if not the most important – commu-
nication channel for the interaction with customers.
In order to achieve a cost advantage over the traditional mobile network providers, customer self-service
functions via an internet portal are indispensable as a substitute for expensive customer care organisa-
tions.
The increasing integration of the business world leads to the necessity of enhancing one’s own portfolio
with complementary offers through partner companies. On the other hand, the MVNO’s development of
new sales channels is also an important success factor to achieve an optimal sales channel mix.
These new internet applications usually have to be integrated seamlessly with the MVNO’s existing in-
ternet offer in order to be accepted by the end customer.

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3 Valtech Service Offering
Valtech GmbH is a business consultancy company and IT service provider for MVNO and MVNE.
Notably, for the MVNO segment with a medium or small number of customers, the time-to-market as-
pect, combined with high entry costs, are huge barriers, especially given the number of providers al-
ready in the market.
The Valtech approach makes special allowance for this fact.

3.1 Value proposition of the Valtech approach


Our consultancy and solution approach is based on Valtech's standard procedure, the so called "agile
unified process". The central paradigm of this approach is to realise a complex scheme iteratively, not
as a single long-term project, which means tackling it in manageable stages. After each stage, a com-
plete and usable part of the scheme is finished. Thus, the MVNO is able to launch its first commercial
services and make its first quick wins after only a short time - and with less capital expenditure. Knowl-
edge gained can flow into later stages, and there is always the possibility to “correct the course”.
Valtech has successfully applied this procedure more than 100 times, especially under technically and
organisationally complex conditions.
Valtech uses this methodological approach on all levels and in all phases of a project, which means not
only on the technical level but also for the preparation and implementation of the business concept, the
business model and the business processes.
The central principle of the “agile unified process” applies here as well.
 High Value First – functions of value in early phases
 High Risk First – early elimination of risks
 Small Steps – continuous success control - early feedback
Thus, Valtech has a unique market position as this concept allows us to also realise MVNO business
models for medium and small sized companies.

3.2 Business process and system integration


Valtech has gained profound knowledge of the business processes of mobile network operator, as well
as of companies in other industries, from many projects. Valtech applies best practices to carry its know-
ledge into projects.

3.2.1 Definition and integration of business processes


In the course of workshops, the business processes necessary for the chosen business model and the
interfaces to the existing business processes of the future MVNO are first of all identified and prioritised
according to the “High Value First” and “High Risk First” described above.

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This prioritised list of business processes will be converted into a plan that maps the implementation of
these processes to different project phases. The integration steps derived from this prioritisation guaran-
tee an early commercial start with low risks.

3.2.2 System integration


In numerous integration projects, Valtech has successfully realised distributed and system spanning
business processes in rapidly growing IT landscapes.
For this kind of system environment, service oriented architectures (SOA) have been established as the
appropriate architecture concept. Its main benefit is the loose coupling requirements, particularly with
the integration of legacy systems, as a deep integration usually involves expensive changes to the sys-
tem. This is often not desirable when critical business processes are concerned.
The integration on an architecture level as close as possible to the business processes makes sense
from a financial point of view as well, as there is minimal expenditure needed for development, tests and
quality assurance.
For the realisation of system spanning business processes, Valtech focuses on standard compliant ap-
proaches including service oriented architectures and web services.
Besides the necessary adjustments and software development, Valtech adds its profound knowledge on
quality assurance and tests to integration projects.
If necessary, software adjustments and essential quality assuring measures can be outsourced offshore,
completely or in parts. Valtech’s special duoshore approach has been proved and tested in similar pro-
ject scenarios.

3.3 Online business


Valtech has a long experience in designing and realising customer and partner portals, especially for
mobile telecommunications. These portals can cost-efficiently be used for customer self-management,
order processing, billing (including online payment, if desired) and for all customer related processes.
Valtech focuses on standard products and technologies, e.g. Sevenval FIT and XML technologies, and
uses standard development approaches, including J2EE.
The most important criteria for the choice of approach are the technical requirements, the expected life
cycle of the application and the usability requirements of the primary target group.
This ensures optimal protection of investment alongside high cost-effectiveness and optimal time-to-
market.

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3.4 Mobile portals
The enhanced service provider MVNO (ESP-MVNO) enhances MNO services with its own content and
services. On the one hand, this increases customer retention by using target-group specific content. On
the other hand, the deeper vertical integration improves the margins of the MVNO.

Figure 3: Sevenval FIT Mobile

Valtech focuses on an incremental procedure to minimise commercial risks. First of all, the existing con-
tent of third-party suppliers will be integrated and, if necessary, adjusted. In a second step, own content
and services are incrementally realised and integrated.
The existing content of third party suppliers is usually integrated with the help of established standard
products by Valtech’s technology partners, e.g. Sevenval FIT.
The choice of standard products guarantees the integration of content and, in particular, the support of
various out-of-the-box handsets.
Even new handsets can be supported immediately.

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4 Glossary

BSS Business Support Systems: All systems mapping commercial business proc-
esses with telecommunication providers.

CDR Call Detail Record: Data record mapping telecommunication service usage.

Core Network Fixed network for the communication between radio network elements. In a
core network, both signalling data and user data (e.g. telephony, data ser-
vices), is transferred.

CRM Customer Relationship Management: All processes and systems necessary


for the administration of customer relationships, customer communication,
and the utilisation of user data.

ESP-MVNO Enhanced Service Provider MVNO: MVNO offering its customers value-added
services based on the MNO’s telecommunication services.

Full-MVNO Full MVNO: MVNO only using the radio network of the MNO. The MVNO op-
erates all other network elements (e.g. switches, HLR) and the core network
on its own. To date, there is no full MVNO on the market.

NDC Network Destination Code: Prefix to the telephone number indicating the net-
work used (however, since the introduction of portable telephone numbers, a
unique allocation no longer exists).

MNO Mobile Network Operator: Provider of mobile telecommunication services that


operates the infrastructure and necessary systems itself and owns the appro-
priate license of the regulating authority.

MSISDN Mobile Subscriber Integrated Services Digital Network Number: Telephone


number of a mobile subscriber.

MVNE Mobile Virtual Network Enabler: Company that carries out certain business
processes for the MVNO (e.g. accounting).

MVNO Mobile Virtual Network Operator: Provider of mobile telecommunication ser-


vices with no radio network infrastructure of its own. It uses the infrastructure
of a “real” mobile network operator.

OSS Operation Support Systems: All systems mapping the technical functions of
the telecommunication provider.

POS Point of Sale: Shops selling products and services of the telecommunication
provider.

Provisioning (Business) process responsible for the setup of a new subscriber in the
MNO’s and MVNO’s OSS systems.

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SLA Service Level Agreement: Agreement on performance and quality standards
of services.

SOA Service Oriented Architecture: Architecture approach focusing on the sys-


tems’ technical services and components. The services of these components
are connected via defined web services. The mapping of system-spanning
business processes is based on these services.

SIM Subscriber Identification Module: Physical module (smart card) that identifies
and authorises subscribers of a mobile network.

SP-MNVO Service Provider MVNO: MVNO offering its customers the MNO’s telecom-
munication services as its own.

(Agile) UP Method for the realisation of projects with dynamic requirements. The Unified
Process (UP) provides for iterative project implementation. In each phase a
complete and expedient subset of the total functionality is realised. The
knowledge gained flows into the next phase. As a consequence, the customer
or user of the system is involved in the project at a very early stage.

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