Shell pumps out virtual mobile services in HK
Following Virgin Mobile Asia’s retreat from the Singapore mobile market in early July, after just seven months of operation, there was plenty of commentary questioning the viability of the mobile virtual network operator (MVNO) model in Asia-Pacific. Jackie Cooper, Ovum Asia-Pacific Analyst, reports.
Virgin Mobile had perfected the art of the MVNO in some of the world’s more mature mobile markets, forming crucial local market partnerships and entering the market with simple deals and a whole lot of fanfare. So, it’s safe to assume that if the king-of-MVNOs can’t get it right, then other potential MVNOs looking to penetrate Asia-Pacific’s mobile market don’t stand a chance? Right?
Maybe not. With regulators showing increasing support towards MVNOs in some Asia-Pacific countries - Ovum believes that a numbers companies with strong brands and wide customer reach may successfully pursue MVNO opportunities in some of the region’s countries and markets.
Opportunities in this space are also likely to appear for non-telecoms companies with internationally recognisable brands and extensive distribution networks. Companies such as global petrol and pumps company Shell Oil, which launched an MVNO service in Hong Kong in March 2002.
Shell Mobile’s story
In January 2002, Shell Oil signed a 50/50 joint venture deal with domestic Hong Kong mobile operator Sunday Communications to launch an MVNO service under the Shell Mobile brand. In the Sunday Communications financial statement for 2001, the company stated: ‘MVNOs are rapidly becoming recognised as potentially efficient channels to reach specialised customer groups’.
Based on research which claimed that two thirds of mobile calls in the US originate from cars, Shell no doubt saw the joint venture as a timely opportunity to trial premium telematic services on existing customers and potentially busy Hong Kong taxi drivers. Telematics presents new opportunities for the car industry. In March 2002, Ford Motor Company, PSA Peugeot Citroën and Renault-Nissan also announced of a joint
venture to develop telematics solutions for European motorists.
Shell Mobile explicitly targets motorists in Hong Kong and is supported by over 60 Shell petrol stations along with other selected locations. The Shell Mobile motorist package consists of SMS Traffic Alerts, Traffic Reporter Service, Route Planner, Journey Assist and Location Finder (alerts the user to the nearest car park or Shell Service station). Very niche indeed.
The company chose well to launch in Hong Kong – a country with a pro-MVNO telecoms regulator. Under the terms of the recent 3G spectrum sale, each Hong Kong licensee must make 30% of its network available to MVNOs, which has led smaller operators such as New World Mobility to pursue the MVNO strategy instead of bidding for its own 3G licence.
Shell Mobile numbers are unknown at this point, so it is difficult to gauge precisely how the MVNO has fared in its first three months of operation. But Shell Mobile’s odds are as good as any strong new entrant’s. Not only has the company selected the location and target market well, but Shell Mobile has the capital and brand equity needed to attract new customers in a mobile market as saturated as Hong Kong.
Opportunities for alternative players
Telecoms market opportunities for alternative players in Asia-Pacific are not extensive. The region’s fixed sector has never been an easy market for new competitors to penetrate. In stronger times, various utilities and pipeline companies sought to tap into the comparatively faster growing and more profitable telecommunications market by leveraging off their existing infrastructure. However, most efforts by these
alternative players have slowed due to a general reduction in competitive opportunities and the global telecommunications market slowdown.
Opportunities for the provision of basic Internet services are also decreasing. Whilst the provision of xDSL is growing in many of the region’s markets. It’s Asia-Pacific’s modern and brand-conscious mobile market which presents the most opportunities to new players.
Alternative players with strong brands, good customer relationships and established distribution networks have the greatest chance of competing in Asia-Pacific, through some form of virtual network or value-added resale arrangement.
As noted in Ovum’s recent Structuring for Survival: Strategies for Telecoms Players report, users will increasingly buy communications solutions from those companies that best understand their requirements. Such specialist service providers need not necessarily be telcos. The advice is that existing telecoms players should look to form short- and long-term partnerships with other companies that are best placed to
understand end-user demand for content- and service-based solutions. Many of these potential partners may be outside the telecoms sector.
Related Ovum research
Structuring for Survival: Strategies for Telecoms Players
Mobile@Ovum
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