Virtual access

Mobile phone giant i2 has taken yet another step in its ambitious expansion strategy. Traditionally known as a handset distributor and retailer, the company is preparing to become the Middle East's first mobile virtual network operator (MVNO).

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By  Administrator Published  October 31, 2007

The Saudi Arabian company recently announced its intention to acquire its first MVNO licence in the kingdom of Jordan and publicly claimed that it is currently in talks with several operators to offer MVNO services across the region.

"This move is in line with our business strategy to expand the value proposition of our services and be part of the pioneering developments in the Middle East's telecommunications industry," says Abdul Hameed Al Sunaid, CEO of i2.

The regulatory climate in Jordan makes it the only country in the region where such an operation can be launched.

Jordan's Telecom Regulatory Authority (TRA) recently said it would begin allowing MVNOs to operate alongside the three existing mobile providers, Orange, Zain and Umniah.

Al Sunaid claims that i2 is scheduled to sign the Jordanian MVNO licensing agreement in late November, or early December, with a proposed launch date of January 1, 2008.

He also adds that the company is currently conducting negotiations with Jordan's existing network operators for the wholesale purchase of airtime.

Unable to disclose the total cost of i2's market entry in Jordan, Al Sunaid does note that the company will invest US$10 million in the initial marketing campaign of the MVNO launch.

He also claims that the total investment will depend largely on the amount of spectrum outsourcing the incumbent operators are willing to undertake.

"Virtually all of the work has been completed from our end, we've completed all of our technical proposals and are in advanced stages of negotiations with operators. We are virtually ready to push the button," adds Al Sunaid.

But MVNOs do face challenges when it comes to the price of the voice minutes they are re-selling, according to Stephanie Pittet, a principal research analyst for research firm Gartner, mobile devices and consumer services group.

"MVNOs are at a disadvantage because they are charged relatively high wholesale fees for voice minutes, and voice calls account for the largest portion of their revenue," she says. "In many cases, the rate negotiated with the network owner determines the viability of the MVNO."

But this has done little to deter Al Sunaid, who is convinced that Jordan's liberalised market is ideal for the MVNO concept. He explains that the decision to develop into an integrated communications provider in Jordan was governed by the comparatively liberalised telco market in the kingdom.

"We want to apply and get MVNO licences in every market we operate in, if the business model allows it," he says.

"Jordan is the first market we are launching these operations in as the regulatory climate there makes it the only country in the region where such an operation can be established," he adds.

The move by Jordan's TRA to introduce MVNO services is a key step in boosting competition and a major step towards the decentralisation of the mobile market in the region, according to Al Sunaid.

He also explains the rationale behind such moves is dictated by the market dynamics of each individual country.

"The regulatory climate in Jordan makes it the ideal market to launch such operations but there are other conditions we will take into account before we take such decisions," he says.

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