Re-writing the rule book

The ICT industry has enjoyed a proud history of revolutionising how people live their lives, says Tawanda Chihota.

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By  Tawanda Chihota Published  June 3, 2007

The IT and telecoms industries have enjoyed a proud history of revolutionising how people live their lives. It is a characteristic that has placed these key sectors at the heart of virtually all other commercial and recreational endeavours, and here in the Middle East and Africa a step change is taking place, which is again set to have far-reaching implications.

A group of individuals, many of whom are armed with telecoms experience gleaned from operational exposure to markets in Europe and Middle East, have established a company seeking to enter the market as the region's first mobile virtual network operator. Now the identification of the potential for the introduction of MVNOs in a number of markets in the region is nothing new - mobile retailers Axiom Telecom and i2 were among the first to talk-up the opportunity more than a year ago. What is new is that Friendi Mobile, the Dubai Internet City-based MVNO start-up, is seeking to develop a MVNO network spanning at least 15 countries in the MENA region.

The potential for a community of mobile subscribers covering a dozen or more countries across the region is immense, achieving something that even the most acquisitive mobile network operator has not been able to achieve. Benefits accruing from economies of scale and preferential roaming are obvious, and the folks at Friendi Mobile are busy explaining the benefits of the model to network operators and national regulators alike.

This pro-active approach appears likely to pay dividends with the company looking to have made the transition from launch mode to commercial activity by the end of the year. As one could expect though, some national regulators are likely to require greater lobbying than others in order to accept the introduction of the MVNO business model at this time.

Take Qatar for example. Late last month, the country's de facto regulator ictQatar closed the pre-qualification phase of its process to license a second mobile operator, and break the Gulf's last remaining monopoly market. However, a tinge of protectionist outlook persists, given one of the licence conditions imposes a moratorium of three years on any other independent service provider entering the market. Put in simple terms, such a condition excludes the possibility of a third-party service provider such as Friendi Mobile entering the market as an independent service provider.

In Western Europe, the MVNO model has become well established, with an estimated 150 in operation in comparison to about 75 mobile network operators. MVNOs are able to form part of an aggressive strategy as well as a defensive one, and appeal equally to both established incumbents as much as to new entrants. Most appealing to operators, is the ability of MVNOs to increase the use of network capacity, generating revenue from capacity that may have otherwise lay fallow.

Thus Friendi Mobile is keen to emphasise that its pitch to participate in the regional telecoms market is not to be viewed as a competitive play for the same subscribers network operator's currently serve, but as a tool to widen the appeal and accessibility to mobile communications. It is a compelling argument given it is estimated that the wholesale contribution to network operators' revenues from MVNOs is typically higher than the incremental revenues they receive from retail users.

The bottom line is that the net benefit to network operators in reaching an agreement with an MVNO is often positive, and I relish the prospect of reviewing the development of Friendi Mobile and its imitators in the months and years ahead.

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