The regulator ARCEP has released numbers today for Q2 of 2006. France had at the end of June 48,4m mobile subs, totaling over 80,3% penetration rate. French MVNOs share a 1,46% market-share, vs. 0,91% 3 months earlier.
He was kind enough to invite about 20 of us, bloggers, to lunch today at 'Mood', a fancy restaurant off the Champs Elysées.
In this clip, you can listen to his pitch. I won't go into the details of the offering, you can read it elsewhere or watch the clip.
But my take on this venture might be of interest:
* back in 2004, I was working at Time Warner, as head of mobile strategy for AOL Europe, looking very closely at the opportunity of launching an MVNO.
* I believe Jean-Louis has a winner in terms of market positionning: almost 2 years ago I wrote that my 2 favourite mobile applications were mobile IM, and mobile email. I still haven't seen them launch massively in the marketplace because of old school walled garden strategies, and TEN is doing it now.
* TEN is focusing on simplifying the market offering with simple products: that was the strategy adopted by Virgin Mobile in the US, with fantastic success.
* JL COnstanza has a great track record at building cost-effective businesses with a huge track record in direct sales, while he was at Tele2. No doubt on his execution skills.
My only doubts are :
* he is betting on 3 market phones, targeting 3 market segments. I would either go very mainstream and support whatever is out there with an entra layer (bluestreak, streamezzo, surfkitchen... can help here), or design his own ad hoc phone with the likes of ModeLabs. Virgin Mobile UK decided to go to makret without any phone. That might be a good strategy, as the phone subsidy is a huge cost. Nevertheless as there aren't that many good devices for mobile texting / emailing / chatting (just as the hiptop), I would maybe focus on those phones only for subsidy, and let users come in with their own phones if they want.
* he is still not offering a flat rate data plan, as he doesn't yet have the right agreements it seems with host carrier, ORange. I would urge TEN to go full speed on becoming the market leader in mobile Internet, offering flat rate web surfing, and even flat rate internet everything. TEN already has its own APN, and that is an achievement.
All in all, this is a very ambitious play with 15m users as the initial goal in France, and for me - a geek - he is 100% in the bull's eye.
Final drinks tonight with the AOL Europe folks on the Tegic (T9) boat: Hubertus von Roenne & Julien Salanon. Time to get back to Paris. I took over a 100 pictures of people, products, conference halls, etc. today + some great videos of demos. I'll post a selection shortly to share with you all. I had an intense day and a great time.
Therefore, bye bye Cannes, see you in Barcelona next year (3GSM is moving there from now on).
Update: some pictures of the folks I run into are on my moblog.
Hey... I made it. I'm only here today wedenesday, but would love to share a talk with any of you folks visiting the place. You should have my mobile number by now ;)
The buildings are all dressed up in sponsor colors ! And I've already had my first chat with Patrick Parodi, VP PacketVideo Network Systems. He's atually talking about mobile video as a speaker today at 14:55-15:15.
PS: it seems Typepad's backoffice has changed today. Don't have time to check it out today.
Waow! This is a once in a year opportunity to meet Santa Claus! Today was the first day of the 3GSM World Congress 2005 in Cannes, France, and already so many new product announcements! The rumor has it that I might not resist long, and show up just for the day on Wednesday. Anyone care for a quick coffee there ? Drop a comment on the blog!
For reviews on all these toys, check engadget today.
Just in, and expected for a very long time: NRJ announced a couple of hours ago that it has signed an agreement with SFR (Vodafone's partner in France) to become an MVNO, and even better the first 3G MVNO in France.
This was to be expected: if you remember well, I was working on a very similar topic last year with a major ISP in Europe - I remember reaching the conclusion quickly that the best new entrants on this market would be
1. brands that target a switchable audience or a new audience (people that do not already have a phone): teens are an OBVIOUS choice 2. companies that have access to targeted and extensive media space 3. to some extent, companies that have experience in aggregating content, ie. bringing something different to the consumer than just voice and data.
Our obvious candidates in France were 2 radios: NRJ and Skyrock, leading teen rock / rap radios, and musical/teen TV station M6. There you go, that private prediction is now live.
Funnily enough, SFR also signed a deal with Futur Telecom last week, a deal of no real importance, as they had been working together in the wholesale market for quite some time.
And launching an MVNO, at the same time that 3G launches in France is smart: apart from that stupid video-conference customer proposal, there was no real incentive to go for high-speed mobile data. Now teens will be able to use their phoenes as jukeboxes (read MP3 players - hello iPod !), small devices to watch musical clips, contests, etc.
Update on 11/2/05 very early: just heard Nicolas de Tavernost on BFP Radio, CEO of M6 TV. They will be announcing that they are becoming MVNOs as well with Orange as host operator: it will be announced at 3GSM next week in Cannes. Fascinating developments! (news report here)
Let's do some maths:
1) Imagine you target 100,000 customers by the end of 2005 (this is what Debitel is saying. Breizh is not commenting).
2) imagine a monthly ARPU of 47€ (source: the French regulator's latest figure for bundles; which I use as a proxy for pre-pary (more than 95% of Virgin's installed base, or the Danish market benchmark). I suppose this ARPU is excluding tax. This ARPU does not account for bad debt (an issue with mobile telephony), nor revenue-share with service providers. Plain ARPU billed to customers then.
This gives us 47*12=564 euros/year/custoemr. Compare this to what an ADSL provider charges every month (between 14,90€ and 29,90€ on average), or a mail order operator such as glowria (same range) as a DVD rental service.
3) therefore potential turnover is 5,64m euros. At the end of the year. Assuming a linear growth, you need to factor a 50% growth factor, hence only 28,2m euros for year 1.
4) now, you need to factor in all the costs: cost of goods sold (COGS: buying capacity from providers), Sales & General Administration (SG&A), Marketing (including distribution), technology (billing, provisionning, data mining, etc.), customer services...
I don't have ratios for all these numbers, but let's assume you are buying capacity at a retail-minus cost of 25% (that is you get a 25% margin on retail prices or 75% costs. And of course, you want to be competitive vs. the market (but not completely slash costs otherwise you won't be able to get a MVNO deal). Try 8%.
Therefore revenue (let's call it gross margin) is now:
28,2 * 25% * (1- 8%) = 6,48m € gross margin (ie. 23,1% of sales).
Remember, this is before SG&A, Marketing, technology, etc.
5) the following years are tricky: You will keep the number of subscribers of year 1* churn (what is it in the mobile world?), and add the new number of subscribers * growth rate. Then multiply by yearly ARPU (which you might try to grow with more services). Und so weiter for the following years.
assuming a churn of 10%, an additional penetration of 80K subscribers, ARPU of an aditional 4€/month:
(100,000 * (1-10%) + 80,000 * (50%)) = 130,000 subscribers
(47+4)*12 = 612€ ARPU
Turnover = 130,000 * 612 * 23,1% = 18,38m euros (a 183% increase on year 1!).
I'd love to hear your feedback, better assumption numbers, and other wild guesses why operators are entering the MVNO game. Some I kind think about is economies of scope (ie. increase existing ARPU slightly, while not increasing costs much), triple-play, stickiness, hype, dressing the window shop for M&A, or complete ingenuity in trying to reproduce the Virgin Mobile concept.
Just heard on the BFM Radio: while it is still negotiating a MVNO deal in France, Tele2 has just signed a MVNO deal with e-Plus (i-mode licensee, belongs to the Dutch KPN) in Germany. More info coming up.