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Virtually mobile

While there is only one mobile virtual network operator in Hungary as of now, that number could easily increase, despite the ongoing crisis and deteriorating market. Brand reselling might be lucrative for companies with a huge clientele.

A mobile virtual network operator (MVNO) is a wireless communications services provider that does not own the radio spectrum or wireless network infrastructure over which it provides services to its customers. In Europe, over the more than 100 “regular” mobile network operators (MNOs), almost 500 MVNOs are operating and offering different pricing plans. And there are 200 separated brands on the market operated by the MNOs themselves. 

In Hungary, there is no independent MVNO in the classical sense, as the only such company, Tesco Mobile – started in March – is not 100% owned by Tesco: Hungary’s third mobile operator, Vodafone, also has a share. Nonetheless, in this case, subscribers contract with Tesco Mobile, not with Vodafone, and the prefix (+31) also distinguishes the service provider from the network operator. 

Since launch, tens of thousands of clients have signed up to Tesco Mobile proving the viability of the idea. Western European examples have shown that retail chains with huge traffic, financial service providers and alternative telecommunication service providers could all successfully operate an MVNO. The idea is easy to understand: these companies have a clientele of hundreds of thousands, making marketing and sales cheaper and easier. 

“As with our competition, our clientele represents the whole population as the various advantages included within our services attract different target audiences,” Tesco Mobile marketing director László Kiszely said. “However, due to the discounts and seasonal offers available only to Tesco Clubcard holders, regular clients of Tesco stores are overrepresented. Tesco Mobile was founded with the intention of starting the most competitive company on the mobile operators market,” he explained.

“To achieve our goal, independent decision-making, a quick response time to market issues, and low costs are absolutely necessary. So in order to exploit the strengths of our strategy, the foundation of a virtual network independent from a network operator was and is the most supportive business model,” Kiszely added. 

 While some time ago mobile network operators disliked the idea of independently operating MVNOs, they have now realized that, as a wholesale business partner, an MVNO generates revenue without much investment, if it is able to handle the technical, customer service and billing tasks on their own.

Although MVNOs are still not widespread in Hungary, brand resellers (BR) very much are. Brand reselling is the lightest form of providing services, as companies own only the marketing, and sometimes the billing and provisioning functions, and the clients contract directly with the MNOs. As MNOs hadn’t previously wanted to let control out of their hands, previous attempts to collaborate have usually ended up in branded reseller contracts.

Most of the Hungarian BRs provide only a mobile internet connection through network operators, like telecommunication companies UPC and Digi; however some, like Lidl, also provide their own voice and SMS services as well. The retail chain – based on hundreds of thousands of customers – can relatively easily build up a satisfactory clientele for its mobile business.

“Our clients usually choose us for our low voice and SMS charges, our simplicity and our phone packages representing a good price/value,” said PR director Judit Tőzsér. “The backbone of our mobile service, Blue Mobile consists of our daily [supermarket] customers.”

While the fourth mobile operator’s status and future is still unsettled, MNOs are becoming more attracted to the MVNO model. According to market speculation, more telecommunication companies with hundreds of thousands clients are close to entering the MVNO market. These companies, with their widespread sales network and significant clientele could be very important strategic partners to MNOs – maybe one day against the fourth operator as well. And while the future of existing free frequencies and the fourth MNO is still unclear, service providers (BRs and MVNOs alike) are all very optimistic about the future.

“For a challenging and fast growing new company that wants to attract customers looking for good opportunities, the changing environment proves to be a fertile breeding ground on which flexible, fast and cost-efficient operation means at least a temporary competitive advantage,” said Tesco Mobile’s Kiszely. “An example: within weeks of the announcement of the new telecommunication tax, Tesco Mobile found an optimal solution to the challenge in the form of guaranteed minute charges. As this message was announced and targeted properly at potential clients, many customers switched to Tesco Mobile as a direct result,” he said. 

 “We are seeking inspiration for better and more customer-friendly solutions in all our competitors’ moves and market changes. A new mobile network operator on an essentially stagnant or slowly declining market will probably continue to sharpen the competition and increase the willingness of mobile customers to make their choice – and this is precisely the environment in which Tesco Mobile is considered to be particularly strong,” he added.

Lidl’s Blue Mobile – started in February – says it has already outperformed its own (non-public) forecasts with tens of thousands of customers. Despite the ongoing crisis and deteriorating market options, Blue Mobile forecasts further growth in client number, as well as in revenue. “More and more people rationalize their mobile spending and our service might be a perfect solution for their expectations,” Tőzsér said.