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Retail MVNO, MVNO, mvno strategy, Roam Like Home

Act now to protect your MVNO from the danger of Roam Like Home

07 June 2017

Roam Like home is almost upon us. We’ve all known about it, and bemoaned its arrival, for quite some time. Like new fake tan products and slimming aids, Roam Like Home is coming just in time for Europe’s summer holidays, but its impact on your bottom line won’t be evident until the autumn. So, are you going to wait until the evenings draw in to scrutinise your decreasing margin, or will you act now to protect your MVNO?

Unlike MNOs, MVNOs can’t offset their additional roaming costs through the inbound roaming of visitors to the UK. To limit the damage, you could drop roaming from your mobile plans, but this would have a negative impact on subscriber numbers. Alternatively, you could increase your domestic prices, but this wouldn’t be popular with customers either, and the EC clearly doesn’t want this to happen as they have announced that they may permit special derogation from Roam Like Home if it causes domestic prices to increase.

For this derogation to be granted, MVNOs must be able to prove that their retail losses represent 3% or more of their margin. Applying for this derogation could be a good option for MVNOs, but to be able to prove losses of 3%, you must have a full, unfettered view of your customers’ overall consumption, both domestic and roaming, as well as your wholesale costs.

Once you have obtained these figures, you can undertake a predictive impact assessment to determine the likely effect of Roam Like Home on your revenue, usage and margin. If you do this country-by-country, segment-by-segment and product-by-product, right down to subscriber level, you will have a good indication of what to expect over the coming months, and whether you have a case for derogation from Roam Like Home.

The key to surviving Roam Like Home lies in understanding your usage and costs, so once you have all your figures to hand, it’s time to optimise your wholesale costs. These costs typically account for 50% of an MVNO’s operational costs, but for some MVNOs we have worked with, this figure has been as high as 64%. We all know that a reasonable chunk of the data, minutes and SMS MVNOs buy  each month is wasted money as it isn’t used by customers, so why not buy only the data, minutes and SMS that your customers will actually use? In our experience, MVNOs that operate on wholesale bundle deals typically save 7-10% of their wholesale costs through analysing and optimising their usage; a saving that would drastically improve margins, and would easily absorb the additional costs of Roam Like Home.

Whilst the purpose of Roam Like Home is to allow customers to use their mobile phones when travelling in the EU in exactly the same way as they do when at home, another potential outcome is the creation of a fraudulent pan-European mobile market in which people buy the cheapest possible plan from a country that isn’t their primary residence. The fair use provisions aim to prevent this, so it is important that you have a fair use and fraud monitoring package that can proactively alert your customer service colleagues to any abuse. This will enable you to detect abuse of Roam Like Home and act quickly, as this too will erode your margins. Signs to look our for include SIM cards that are used primarily for roaming, or that demonstrate a questionable imbalance in consumption between domestic and roaming.

Once the immediate risk of Roam Like Home is under control, turn your attention to the future of your MVNO and plan for its profitable growth. Use what-if modelling to predict the effect on profitability if you were to revise your contract rates and prices. This can reveal new opportunities, helping you to identify a clear path towards improving ARPU. Start to think about digitalising your MVNO. Offer your customers compelling experiences that are 100% online, with various payment options, and engage with them in real-time, even when they are roaming. Becoming a digital MVNO will increase profitability, so that the additional costs of Roam Like Home are no longer such a threat.

Naturally, MDS has the knowledge and expertise to help you to work through these steps so that your MVNO doesn’t just survive Roam Like Home, but is able to grow. Whether you plan to implement all of these steps at once, or to work through them systematically, MDS can set your MVNO on a path towards profitability.

Find out about the MDS Roam Like Home service >>