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Difficult negotiations among operators and skepticism of the model's profitability are the main setbacks to greater expansion of mobile virtual network operators (MVNOs) across Latin America, according to executives and experts.
"It's all about negotiations for the MVNO business model. But operators are in general stuck to an incorrect and old idea that MVNO equals low cost, or that it could mean market cannibalization, and so they refrain from partnering," Daniele Tricarico, Latin America senior analyst at consultancy Informa Telecoms & Media, told BNamericas.
To date, the most concentrated markets have been the most receptive to MVNOs, he said.
"There are several good opportunities to get to higher Arpu and increase Ebitda margin with MVNOs in Latin America, specially targeting the youth segment and with large retailers," he added, but also citing harsh negotiations between operators and retailers as a problem.
Tricarico said large retailers such as Casas Bahia and Ponto Frio are perfect for the MVNO model in Brazil, as they work with high sales volume, reach big consumers and already are a channel for operators, selling mobile phones and SIM cards.
He also said interest in MVNOs in the region primarily comes from fixed operators and traditional players, which see them as an opportunity to increase customer loyalty and bundle products.
Another problem is the time-to-market. According to Fernando Schulhof, a lawyer specialized in telecommunications, regulation Brazil is good - the country, along with Chile, is the only one in the region with specific MVNO regulation - but still leads to a difficult time-to-market.
"Regulation came in 2010, the first authorizations were issued in 2011, but no MVNO is operating yet," he said. "The regulator also has to think of how long it will take an operator to enter the market, because after a while with the licensed requested but still not issued, the market characteristics may have changed."
Telecoms regulator [*1]Anatel's [/*1]mobile services regulation manager, Leandro Carneiro, said the government's main goal with the MVNO regulations was to diversify the telecoms offer. "We simply created the market with the regulation. Now, we are in the phase of evaluating if there is in fact a market."
TIM is the only operator with an MVNO license in Brazil, but none of its projects has taken off yet. Vivo is now moving to enter the niche, and Telefônica's wholesale market director, Victor Czarnobay, the company is studying an entry into the market and confirmed talks with potential MVNOs.
For Informa, the peak of global MVNO launches was 2006, and the opportunity is now in the emerging markets, with new wave of growth driven by Russia, Turkey, Pakistan and Latin America. The consultancy also sees global agreements beyond a single market's borders becoming commonplace.
It is an early phase for MVNOs in Latin America, but there is a strong potential and growth numbers. According to Informa, UFF Móvil, an MVNO launched in Colombia in late 2010, had 250,000 subscribers by 4Q11 for 233% growth from 4Q10.