Mobile Virtual Network Operators in the Sultanate of Oman- Step to create competition

N.P. Singh

Professor (IT)
Management Development Institute
Mehrauli Road, Sukhrali
Gurgaon -122001, India
Email: knpsingh@mdi.ac.in & singh.netrapal@yahoo.co.in

ABSTRACT

This article discusses MVNO scenario in the Sultanate of Oman based on secondary data analysis. At present, the Oman telecom market consists of five MVNOs and two mobile network operators (MNOs). Three out of five MVNOs have already launched their operations and are providing services. They have sealed their deals with MNOs, Technology providers, advertising and marketing agencies, SIM and re-charge coupon distribution channels. The remaining two have also signed strategic partnerships with MNOs and are equipping them for launching their services. The paper discusses their tariff plans, SIM card distribution channels and marketing strategies to survive in a highly competitive environment.

Key words: MVNO, TRA Oman, Resellers, tariff plans.

1.0. Introduction

The Telecommunication industry across the world is full of controversies and continuous discussions be it regarding spectrum policy, number portability, sharing of infrastructure, or entry of new mobile network operators. Most economies have allowed entry of mobile virtual operators (MVNO) with a view to making the market more competitive in providing quality services to subscribers. Finegold (2004) mentioned that MVNOs are more about customers, community and contents rather than technology. MVNOs compliment the efforts of network operators. MVNO's are in some ways a great help to the wireless/telecom industry, as they add to the choices consumers have and work to the wireless provider's - who own the infrastructure through revenue sharing models - advantage. MVNOs are roughly equivalent to the "switchless resellers" of the traditional landline telephone market. Christine (2007) mentioned that MVNO is all about customization and quoted the example of Virgin Mobile.

Singh (2009) studied in detail, the MVNO business models, status of MVNOs in various countries, MVNO categories and possibilities of introduction of MVNOs in the context of India. Paul Merry (2008/06) has also identified nine major MVNO service approaches. These are
(i) discounted services,
(ii) community services,
(iii) Mobile Network Operator emulation,
(iv) premium Value Added Services,
(v) Fixed to Mobile Convergence (FMC - FMC is a super voice service that lets the customers mingle calls between fixed line and mobile handsets). The customer can set rules such as "If my mobile phone is off, ring the call on my fixed line instead of going to voice mail",
(vi) advertising and loyalty,
(vii) enterprise,
(viii) Location Based Service (LBS), and
(ix) telematics.

The concept / business model MVNO is very popular but not much literature is available on the subject in the context of Asian countries. This paper is an attempt to fill this gap. The paper discusses:

(i) the process of the MVNOs in Oman,
(ii) the strategies followed by three MVNOs who had already started their services in Oman with reference to their tariff plans, and marketing efforts. The data is collected from secondary sources for the purpose. The main source of data is Internet. Based on the analysis, a few conclusions are drawn as listed in the last part of this research paper.

2.0. MVNOs Worldwide

Despite its modest share in the world mobile market, the MVNO market remains robust. Statistics released by industry analysts and telecoms.com parent Informa Telecoms & Media predict that MVNO subscriptions will reach 150 million worldwide by 2013, with 42 per cent coming from Western Europe. In all, by 2013, it will account for 3% of the subscription (http://en.wikipedia.org/wiki/MVNO).

There are currently approximately 360 (Table 1) planned or operational MVNOs world-wide according to consultancy firm Takashi Mobile. Countries including Algeria, The Netherlands, France, Denmark, United Kingdom, Finland, Belgium, Australia and United States have the most MVNOs. In these countries the MVNO marketplace is stabilizing and there are some well-known MVNOs which are highly successful. Other countries, such as Portugal, Spain, Italy, Croatia, the Baltic States, India, Chile, Austria, and Oman are either launching the MVNO or in the process of launching MVNO operations. However, if there are many MVNOs in a single country, it is difficult for new entrants to create space as the overall marketplace is highly saturated.

The MVNOs are contained within their MVNO market. MVNOs operations are classified into three categories, i.e., consumer-driven MVNOs, enterprise driven MVNOs and data-focused MVNOs.

Table 1: MVNO Status Statistics

3.0. MVNOs in Oman

Oman's Telecommunications Regulatory Authority (TRA) issued five class two licenses, allowing the resale of basic mobile services on 28th June, 2008. These MVNOs are Friendi Mobile, Injaz International, Kalam Telecommunications (later on it has backed out and its license was awarded to an Omani company, Samatel), Majan Telecom, and Mazoon Mobile. The cost of each license is OR 2,500 (US$6,500). Licenses are for a period of five years but are extendable. These licenses are called class two licenses (See Footnote 1) in Oman. It is mentioned in the news that a sixth license was awarded in October, 2008 to an un-identified company. They have to buy Minutes in wholesale from existing two Class-I operators which are Oman Mobile Telecommunication Company and Omani Qatari telecommunication company (Nawras). Resellers have the option of programming and issuing their own branded SIM cards or relying on the host operators to provide their programmed SIMs. Additionally, the licensees can independently recharge the products and services they distribute or utilize the infrastructure of the host operator. Billing and invoicing may also be independently handled by the licensee or by the host operator. "Under the license terms, the new firms are obliged to earmark a minimum of 65% of all jobs for Oman citizens during the first year of operation. They must also set up a contact centre to respond to customer queries and complaints (BI-ME (2008)".

The total population of Oman is 3,418,085 with an area of 212,460 (sq km) as on 6th March, 2010 (http://www.countryreports.org/Oman.aspx). In December 2009, the total number of mobile subscribers was 3,964,666. It has observed a growth of 23.2% in 2009. The mobile market is served by two Mobile network operators and five resellers. The detailed data is given in Table 3 and Figure 1. According to the data in Figure 1, there were four players in the mobile market of Oman, i.e., two MNOs and two resellers (Renna & Freindi) during the 3rd quarter of 2009. As per latest reporting, on 10th January 2010, three MVNOs were in operation (News 2010).

The major component of growth is pre-paid segment of the subscribers. However, it is mentioned by experts that given the relatively small size of the mobile user population and the effective development of telecoms services by the two licensed network operators, there is uncertainty about the prospects of the five resellers' future in the market (Comm (2009).

As a benchmark, it is estimated that attracting a base of at least 100,000 subscribers is necessary for an MVNO/reseller to achieve the economies of scale necessary to sustain a viable business. According to Mazoon chief executive's statement, an MVNO will survive in the Omani market if it can gain between 3-10% of the market, which would be as much as 288,000. However, it will be tough competition in the Omani mobile market for survival between five resellers. The relations of two MNOs in allocating spectrum to five MVNOs will be another major issue in Oman's MVNO market (Bevir (2009).

As mentioned above, the five resellers have either launched or planning to launch their services in Oman. The status of their various activities in November, 2008 is summarized in Table 2. Bevir (2009) mentioned that MVNOs are in a position to launch their services. The present status of various activities of five MVNOs in OMAN is summarized in Table 3 as of March 2010 and detailed in the following paragraphs.

3.1. Majan telecommunication LLC (http://www.majantelecom.com/):
Majan telecommunication LLC, Oman, is one of the five companies that have been given a MVNO license by Omani Telecom Regulatory Authority (TRA). Its brand is known as Renna. It has tied up with many international and Omani players who set up a distrbution network. It is using incumbent operator Oman Mobile network for providing services (Roger (2008b), and telegeography (2009). As a part of its strategy, it plans to penetrate in the under-served market segment of the customers by offering differentiated services. It has its own tariff plans, maketing and sales channels. It has set up a call center to serve customers better.

Tariff Plan: It started with two innovative tariff plans. It claims that there is no monthly or hidden fees.
(i) Renna 6-6 is a classic peak/off-peak price plan that provides customers with an extra low tariff of 38bz from 6pm.
(ii) Renna 24/7 is a 'flat rate' price plan that offers the same low price day and night. It is designed to suit customers who make most calls during the day (Press Release (2009)). In addition, it allows customers to select 3 preferred international numbers to call at special discounted prices.

SIM Card & CRM: Renna SIM cards, with an entirely new number series, are available at over 250 outlets across the Sultanate including dealers managed by some of the best and most experienced distributors and retail brands in Oman (Press Release (2009)). According to its website, one can buy its products at Renna shops (Dhofar Building and KM Trading in Ruwi plus at Renna's Head Office in Athaiba and Rameez in Seeb) and hundreds of other dealers all over Oman. It provides online support to customers from Renna phone, free of charge. As a part of its marketing strategy it offers credit. During March 2010 it offered 10% and 20% extra credit on 3 Rial and 7 Rial recharges.

Source: http://www.oeronline.com/php/2008_nov/telcom.php

Table 2: Status Check of MVNOs in Oman - November 2008
(Source: Market Analysts)


3.2. Injaz International Telecom LLC (www.injaz.com):

It received a license on June 21, 2008. It has signed a strategic partnership agreement with MNO Nawras to launch mobile services over the network of Nawras (Editor (2010)). Its partnership agreement was completed on 9th January 2010. It is yet to commence its operations. Earlier, Times of Oman (2008) reported that Injaz International telecom will adopt a service-oriented and customer-driven strategy. It dreams to become the most preferred 'enhanced mobile service provider' in Oman. It will target individual and enterprises customer. It will develop novel and affordable products and services that are competitive and world-class.

SIM Card: It aims to provide the Omani market with innovative products and services supported by its sister company Al Makhah, the largest distribution channel of SIM cards in Oman (Telegeography (2010)).

3.3. Freindi Mobile (www.friendimobile.com):

It is the third MVNO in Oman to start its activities at the end of 2008 (Roger (2008)). It gets its license through Arab Link (Nicole (2008)). It uses the network of Oman Mobile. It is also known as Connect Arabia. On 5th March, 2009 Freindi Mobile has become the first ever Mobile Reseller/Mobile Virtual Network Operator (MVNO) in the Samena region (South Asia, Middle East and North Africa) to make a mobile telephone call using its own technical platform. The call was between the Chairman and CEO of the Friendi (Press Release (2009a)). As per its marketing strategy Friendi is providing customers with an option to get a mobile number which is easy to remember. It may be the customer's birthday, lucky number, favorite footballer number, parts of the existing mobile number, or any special number.

The free of charge registration is a simple procedure. For ease and convenience, Friendi Mobile has provided two ways of pre-booking the number. Customers can log on to the Friendi Mobile website from home, work or any internet cafe and book their number online anytime or they can visit outlets of Friendi such as (a) Lulu Hypermarkets (Darsait, Bausher, Salalah & Sohar), (b) Muscat City Centre, (c) KM Trading, (d) City Cinema (Al Nasr) & Star Cinema, Ruwi, (e) City Cinema, Shatti or Friendi promoters for help (Press Release (2009b)). As per Kaleej times (2009) it planned to launch its services by April, 2009. However, it was an earlier plan to start its services by the end of 2008. From the data given in Figure 1, it is clear that it has started its operations in the 2nd quarter of 2009. It will provide only pre-paid services to begin with. Freindi is also planning to target 600,000 Indians living in Oman with low tariff plans. It is targetting specifically Indians from Kerala who are 50% of the Indian population in Oman. In collaboration with parent company Arabia Connect, Freindi will also target youth population in Oman. Freindi business looks successful since it could attract two new investor in the form of Oman based Dolphin International LLC and ePlanet Ventures (Thomas (2009).

3.4. Samatel (www.samatel.com):

Earlier the license was awarded to Kalaam telecommunications which has opened its office in Oman in June 2008 (Yousuf (2008)). Within a month, Kalaam telecommunications was looking for various partners for launching MVNO operations in Oman and confident that it would make the Oman experiment a great success like its success in Bahrain but backed out later on. It was then awarded to Samatel that was founded in 2009. It has about 120 employees. Samatel is now launching its website. It will start its operations in due course. It has a regional expansion vision. It will carry an innovative and potentially disruptive customer-service focused wireless experience in Oman and Yemen. It is hoping to change the perception of consumer mobile services and operators. It will un-bundle services and will transform the services in to a new format. The end-user will have control over the format. The customer will decide what they wish to utilize and will pay accordingly. The company will target the pre-paid customer segment. It will also set up a contact center with a view to attracting outsourced businesses (Oman Economic Review (2010).

Figure 1: Mobile Operator's Market Share
Source: http://www.tra.gov.om/newsite1/Portal/Upload/Documents/342_2009_Q3.pdf

3.5. Mazoon Mobile (www.mazoonmobile.com)

Mazoon Mobile is a joint venture between Middle East Telecommunications Company (METCO), a subsidiary of WJ Towell group's company (with 51% holding) and Bahrain's Etisalcom (with a 49% holding). Mazoon Mobile commenced its operations in November 2009 (Middleton (2009)). It will also offer 3G data services as a MVNO. The preparation for launching mobile services has been underway since 2008. In October 2008, Mazoon mobile signed an agreement with ZTE (Zhong Xing Telecommunications Equipment Company Limited) of China, for supply of intelligent network platforms (Zawya (2008), Oman observer (2008)). The staff members of Mazoon Mobile spent a week at ZTE obtaining training. Most of these staff members were Oman nationals (Staff Reporter (2009)).

It has also launched its website (http://www.mazoonmobile.com) (see Footnote 2) which features its brand ambassador, the iconic character 'Mazyoon'. Mazoon mobile has tied up with Blacksheep Oman (a joint venture company formed by Bahrain's Blacksheep advertising and the Sultanate's Towell group). The agency will take care of Mazoon's marketing strategy such as brand strategy, advertising, brand activation, public relation, and media planning (The week (2009). The basic approach of Mazoon mobile is to address the customer lifestyle needs and deliver value for money. According to George (2009) Mazoon mobile will target customers from the low end expatriate communities, locals "below a certain ARPU level", youth and rural communities.

Tariff Plan:

Mazoon Mobile announced low international tariffs from the beginning, unlike other mobile service providers. The tariff to India, for instance, has been placed at 77 baisas, while that for Pakistan and Bangladesh starts at 99 biasas. Also calling to other international destinations such as the Philippines is 116 baisas and calls to the United Kingdom are charged at 147 baisas. (Times of Oman (2010)). It means it is targeting expatriates. It may be compared with an ethnic MVNO.

SIM Card and Recharge Coupon: Mazoon has signed an agreement with some "eight or ten" main distributors and each one of them has a network of dealers giving Mazoon access to 4,000 dealer points in Oman.

4.0. Concluding Remarks:

As mentioned in Table 1 and Table 2, out of five, all MVNOs have finalised their agreements with MNOs to launch their services. Out of five, three MVNOs, Majan, Freindi, and Mazoon have started their operations. The fourth and fifth are in the process of launching their services. All of them are finalizing their relations with technology providers, marketing and advertising agencies, and distribution channels for SIM cards and recharge coupons. Based on the analysis of data available in the domain, the following inferences are drawn:

i. As it is 100% sure two MNOs will sell bulk time to five MVNOs in Oman, it will not be a one to one relation between MNO and MVNOs. Having more than one MVNO in the same areas of operations and satisfying them for availability of network will be very complex issues. This is evident from the dispute between Nawras and Injaz International Telecom.

ii. The MVNO may target different segments of the population/telecom users but in the beginning low ARPU segments of the mobile users will be their targeted customers. They may also pursue ethnic MVNO practices or business and tariff models. In fact the first two MVNOs (Majan and Freindi) have started attracting expatriates from many countries.

iii. The strategies of MVNOs are customer centric. MVNOs are in the process of understanding needs of their customers and adapting their services to needs and creating strong relations with their customers.

iv. Oman has recorded a 116% mobile tele-density in December 2009 (Table 3) which may be termed a saturated market. The introduction of MVNO in a saturated market is a laudable effort by the Government to create a more competitive environment in the mobile telecom sector with a view to providing quality telecom services to the citizens of the country. In days to come, with about 7 players (2MNO+ 5 MVNO), the customer will get high quality services and choice. The customer will pay less. They will get value for their hard earned money by having improved service.

v. It will bring competition and better services to the subscribers certainly but in future some of the MVNOs may not survive due to fierce competition and small size of the market as it happened in many European counties.

vi. As can be seen from the data given in table 3, the growth is very high in prepaid segment. With the operations of MVNOs this segment will grow further in 2010 in comparison to post paid segment. All of them will target prepaid segment of the customers.

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