News for the ‘telecom’ Category

New entry in Italian telecom – The emperor is not wearing anything

If an outsider observes the Italian mobile telecommunications industry, they might be tempted to think that it is an industry that has seen significant changes in its competitive dynamics due to much more competition for customers’ money.
After all, from having to pick an operator between the 4 incumbent MNOs 5 years ago, an Italian consumer today can choose his operator from more than 15 different operators.

However, in reality very little has changed and although Italian consumers have more operators to choose from, they still pay some of the highest prices in Europe. There are multiple reasons for why no new entrants have been successful and they vary from poor strategy to poor distribution to poor marketing. However, on a more overall level new mobile operators must offer a clear value proposition to customers relative to the incumbents. After all, why should you buy your SIM in your supermarket, bank or post office if these operators don’t offer any advantages over the incumbents? And in addition to that, they don’t have the same level of service that you get when you walk into the stores of 3/Vodafone/TIM/WIND.

There are several strategic problems and reasons for why the situation is like this but the most important one lies in the relationship between the MNOs and the MVNOs. You should only launch an MVNO if you feel you have an edge over the existing operators, and MVNOs should negotiate contract terms that allows them to execute on whatever value proposition they offer to customers (e.g. distribution, service, pricing). Observing all the Italian MVNOs reveals a similar an un-creative approach: “We have a brand, distribution and a popular website, we’ll leverage that by launching an MVNO”

Italy has the highest mobile penetration in the world. 1 in 2 Italians have two mobil phones but from an operator’s perspective you want to sell them the primary SIM because that’s where the money is. What you wont hear from any of the MVNOs is that almost all of them only have second SIM customers and their numbers look terrible. As it is today, most MVNOs are part of large parent companies which can afford to bank roll their failed strategies. Negotiating with MNOs in Italy is difficult and full of secrecy so it is time consuming and difficult to find the best deal for an MVNO and they can only succeed if MNOs see them as an effective way to acquire customers. The current regulation, favours the incumbents and makes it impossible for MVNOs who can challenge the status quo to enter and that’s why despite 15 operators, they are all remarkably similar while Italian consumers continue to pay some of the highest prices in Europe. As much as I would like MVNOs to challenge the stale MNOs, consumers simply don’t have any good reason to pick an MVNO as their provider.

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Posted: februar 21st, 2011
Categories: Italy, telecom
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Comments: 1 Comment.

Nokia should have known about OODA Loops

If it wasn’t already clear, Nokia is in crisis. While, sales and shipements of smartphones are growing in absolute numbers, they are losing market share fast. Nokia is paying a high price for not paying enough attention to smart phones and the US market which is know the center of the mobile industry.

Nokia’s strategy of producing simple and solid hand sets and being big in Europe and emerging markets, is based on a flawed assumption of adoption curves. It seems to reveal a very linear way of thinking: If we get to be people’s first phone, we will eventually be able to sell them smart phones. However, phone sales are very much driven by carriers and which phones they choose to subsidize and additionally consumers are not particularly brand loyal. This part of Nokia’s business is extremely high volumes and low margins and as their new CEO mentioned in the famous memo, Nokia still haven’t responded successfully to neither Apple or Android products.

Many observers have already called out microsoft as the big winner of the partnership and it remain to be seen whether Microsoft/Nokia can butt heads with Apple, Android and RIM. Nokia has made a very big bet in partnering with Microsoft and essentially letting them control what might be the core to their future competitive advantage.

However, before it ever got so bad for Nokia, they should have known about OODA Loops. I have written about OODA Loops before, and what is puzzling is how Nokia has failed to go through their OODA Loops at a pace anywhere close to their competitors. As the mobile industry increasingly centres on eco-systems of developers and apps and software, Nokia should have realised that making developers happy and giving them and opportunity to succeed should be their first priority. This is a significant shift from being a “hardware-first” company, and clearly Nokia has so far not been able to reorient their strategy according to their customers who are flocking to their competitors.

As Scandinavian and for the sake of the European tech industry I really hope Nokia pulls it off. But their struggles are  an illustrative example of how a lack of agility is deadly to companies, regardless of their size.

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Posted: februar 17th, 2011
Categories: Europe, telecom
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The State of MVNOs in Italy

After MVNO News just published the results (in Italian) of their annual survey about MVNOs in Italy, I want to look closer at how the Italian MVNOs are doing, and in some cases compare it to a similar survey MVNO News published for 2009.

The survey is based on people who have visited mvnoforum.info so the sample is clearly biased towards people interested in MVNOs, and the patterns that emerge are somewhat predictable:

  • MVNO subscribers are most likely to be men, between 31-40 who has PosteMobile as their preferred MVNO
  • It is more likely that the primary SIM is from an MVNO (59% versus 33% in 2009)
  • Price on voice tariffs are still the main reason customer’s choose to switch to a MVNO

While MVNOs might seem like they are doing well, all the numbers are relative to each other and the most essential question of average revenue per user (ARPU) is not given so it would be risky to conclude that things are going the right way for MVNOs in Italy.

ARPU is particularly important in Italy. Because Italy boasts one of the highest penetrations of mobile subscriptions in the world. At around 150% one out of every two Italians have two SIM cards and as an operator the value is in having your name on the primary SIM. Therefore, the truth is that most MVNOs are only customer’s second SIM, and it is difficult to be very optimistic as an Italian MVNO. While PosteMobile is significantly dominating the picture in terms of market share, their ARPU is much lower than their MNO competitors and they are therefore far from financially sustainable. In 2009 PosteMobile had an ARPU around €8. This is around 60% lower than their MNO competitors’ and also 50% lower than the most successful Danish MVNOs. PosteMobile has lost a boat load of money since they started (a boat loaded with more than €50 million) and at the same time they are less effective in terms of revenue per employee than their Scandinavian counterparts. So to put it very simply, if you were an investor you should short the entire Italian MVNO industry.

An interesting question for an Italian consumer would also be: “why should I choose an MVNO as an operator?” Except for bundling with their mother companies activities they don’t offer clear advantages in terms of price, value added services or customer service so in most ways I understand the Italian consumers and I don’t see these trends changing anytime soon.

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Posted: januar 10th, 2011
Categories: Italy, telecom
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Comments: 1 Comment.

You don’t need to know anybody – Italy is full of good fellas

I find that a reason for why people in italy stay away from starting things is a misconception that they have to have some super-wealthy family or be very well-connected with a lot of influential people. In my experience this hasn’t been true at all and I would like to share how I have gotten many interesting people to listen to my startup idea because the recipe is very simple.

About a year ago two friends of mine and I got the idea to start an online discount mobile operator in Italy. It’s quite an ambitious idea since you essentially would be competing against Vodafone, Wind, TIM and 3 Italia (also called MNOs), but we had seen it work in Denmark, so we knew it could work. As I have written about here our professor was not very supportive of the idea but we wanted to give it a shot. I followed a guy on twitter who blogged about telecom and who turned out to work for one of the Italian MNOs. From twitter I emailed him more details about our project and he ended up introducing us to the most senior guy at his firm which was relevant for our project. From that point on we have continued negotiations and are still in contact.

In terms of investors and people from the startup environment, I was lucky to meet some investors through our course. Additionally, I really liked what Stefano was doing at www.thestartup.eu so I emailed him an we met a couple of times and through him I have been introduced to some great people and pitched my project to dpixel where he works. Additionally, a guy Stefano and his firm introduced me to has formerly held key management roles at three of Italy’s four MNOs and is now a very helpful advisor.

At conferences like “mifaccioimpresa” and Milan Startup Weekend, I have also met interesting people. Although introductions work best don’t be afraid to approach the people you meet at these kind of events. Most people, and this goes perhaps particularly for successful people are usually very friendly and are glad to help young entrepreneurs if they can. They have been in the situation you are in, and appreciate how much help and advice can mean.

As i said the recipe for this is really simple: Be very well prepared and try to be convincing. You’re selling your idea and you must convince people that you are going after something relevant and feasible. Also be friendly and flexible. Many people are busy and first impressions last a long time so if you haven’t done your homework and don’t know the market or your competitors or your business model you wont be taken seriously.

It’s fair enough to have blind spots (e.g I still don’t know a lot of things related to the technical aspects and telecom regulations) but be upfront about them and how you are going to solve them. In our case a mobile operator is really a lot of marketing and the legal aspect not even lawyers are sure about, but if you are honest about what you don’t know your can avoid unpleasant surprises later on.

Overall it should be clear that we have spent a lot of time seriously putting together convincing reasons for why an online discount mobile operator is a good idea and could be a good investment, we really haven’t done anything extraordinary but that, to meet a lot of interesting people so there is no reason that you shouldn’t be able to do the same, if you have an good idea and a compelling reason for why you are the right people to execute it. Take my word for it, Italy is full of nice and supportive people that are doing what they can to help people start something cool, you just have to be proactive and persistent to find them and get in touch with them.

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Posted: november 19th, 2010
Categories: Italy, startups, telecom, VC
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Comments: 7 Comments.

Survey for my telecom startup idea

The startup I am trying to launch is a cheap, simple and online mobile phone operator. Since there is little data available about this it would be a great help if you can fill out the survey below.

And if you find it worthwhile to answer please share and retweet it! :)

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Posted: september 28th, 2010
Categories: Italy, marketing, telecom
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