France-based Transatel has grown from an MVNO service provider to having a hand in embedded connectivity, IOT and the connected car market by leveraging its experience in SIM management and operator relations in these new sectors.
Their domestic market currently accounts for 25% of revenue, mainly through their role as an MVNE for Orange based MVNOs, while 50% is UK based through their role as an MVNE for EE based MVNOs. However in an exclusive MWC interview with Mobile, Transatel’s CEO details why he expects 60% of revenue to come from outside of Europe by 2020.
Key to their new sector growth is SIM 901, an international SIM backed up by a custom arranged global MVNO. Designed for embedding in not just mobiles but also cars, watches and laptops, it helps overcome the logistic tangle for manufacturers looking to utilise embedded connectivity without negotiating operator agreements on a nation-by-nation basis.
Discussing the SIM’s progress Bonifay stated, ‘One of the big priorities for us is coverage, we now cover more than 100 countries and destinations, we’re deploying 4G throughout Europe and that’s progressing well.’
Outlining the implementation of the SIM, the CEO highlighted to the laptop and tablet market, ‘We’re seeing more OEMs joining the Microsoft Programme for embedded connectivity, all managed by the Windows store. We’ve got larger launches in the US and in Europe in the fall, and we are actively working towards a launch in Japan before the end of the year.
It’s a market which is due to become more affordable, with the Transatel boss telling Mobile, ‘The partnership between Qualcomm and Microsoft means the cost of adding a 3G or 4G modem to a device will reduce. This is important as at the moment it can be quite expensive, I maintain that within three or five years, every laptop and tablet will be with inbuilt SIM connectivity. It’s just like how 15 years ago no laptop had WiFi, but 10 years ago it became standard and now you wouldn’t even think to question it.’
While larger car manufacturers may invest in their own connectivity solutions, for smaller players, partnering with an experienced connectivity provider may be the way forward according to Bonifay, providing an additional stream for their SIM 901 solution. He comments, ‘Due to our history in the MVNO business we can achieve great synergies in this space, we manage one million SIM cards in the UK with EE so we are a player in the M2M space and the MVNO space. These are things we can bring to car manufactures who don’t have the capacity and expertise themselves.’
Elaborating on the in-car services in demand from the automotive industry and its customers, Bonifay adds, ‘The uses include telematics services such as if you are in accident you find out what happened, if the car is stolen you can find out where it is, when you start the car you can run an auto diagnostic report, you can have partnerships with insurance companies, an end user can want Wi-Fi connectivity, inbuilt connectivity to Google maps, it allows automatic billing as well, which includes very complex issues for the MVNO industry. We can implement this even for small players, which is a differentiator for us.’
The Transatel boss previously told Mobile that their strength as an MVNE across multiple national markets helps to provide the diversification required to weather issues in individual countries such as mergers, legislation changes or changing attitudes to MVNOs.
However, perhaps one of the largest changes for operators is the EU-wide wholesale roaming caps, which are due to come into force early this summer. MVNO Europe, of which Jacques Bonifay is President, described the roaming cap in a recent article stating, ‘With excessive wholesale roaming charges, dominant mobile operators will be the only ones to drive the market, adding barriers for smaller players. MVNOs, being the first-movers in offering innovative services, are therefore crucial for competition adding real value on the telecoms market and to end-users.’
Asked about the impact of the rate cap, Bonifay told Mobile that it differs country by country stating, ‘In Italy the roaming wholesale rates are a nightmare for them, the local market is twice lower than in Germany which means they will lose money on any use of devices outside of Italy. The Italian MNOs will have to reinvent themselves to deal with this.’ Commenting on the UK specifically, he adds, ‘It’s not quite as much of a problem, the wholesale cap is reducing but the market size is also reducing so we will see which reduces fastest.’
UK MNO appetite for MVNOs
Introduced in order to provide competition to major networks and widen access to mobile technology, MVNOs walk a tightrope of MNO opinion – being viewed as an important way for operators to monetize excess capacity but contradictorily, also a rival to the operators themselves. Nothing sums this up better than Vodafone which has made a strategic decision to reduce and limit the number, type and scale of MVNOs that it works with, while simultaneously citing the reduced MVNO income resultant from this as a major factor in their declining service revenue (-3.9% YoY) in their annual results.
Discussing this, Bonifay states, ‘Vodafone doesn’t like competition; they think they can do everything. They say they only want people adding something different but they are not even listening, I’ve sent a couple emails but received no response. They’ve got a very clear anti-competitive position, of course this is a democracy so they are entitled to that approach.
Asked about whether MVNOs pose a threat to MNO models, the MVNO Europe President told Mobile, ‘This is similar to what the CEO of T-Mobile says and it is completely untrue, give me one country where MVNOs have caused a problem, you may have one case in Belgium but in the UK MVNOs are too weak to destabilize the market. In the UK the destabilizing effect is from H3G and they are hardly an MVNO.’
A change of hearts at EE?
The BT, EE merger was not popular with MVNO partners like Virgin Media who publicly stated concerns of retail interference in EE’s wholesale operation, similar to accusations leveled against BT in the broadband market. Despite this, Virgin Media re-signed with EE/BT early this year, and Transatel are optimistic about the merger, with Bonifay stating, ‘Looking back at the EE BT merger, BT has always been well structured in terms of retail and wholesale businesses. With EE before, it was not so separated, we didn’t have 4G from EE because the retail arm didn’t want us to have 4G, and the business strategy was influencing the wholesale strategy. So with this merger, I think it is better because the structure could be more separated. There’s an element of guessing in this but I think it will be better for us, especially as Ofcom will be watching very closely and they will not tolerate BT’s retail business influencing their wholesale business.’
There’s evidence to suggest this optimism may be warranted. After three years of reluctance, EE has given MVNOs like Asda Mobile and Virgin Media access to its 4G network. Asked if this represents a change of approach from EE, the Transatel chief said there had been some progress, ‘It’s true that in the past they’ve played a difficult game with us by not giving access to 4G, things are getting better though I wouldn’t say it’s perfect. We have access to EE’s 4G at a reduced rate, but it’s still better than with O2 or Three.’
The next test in MVNO-EE relations will be the recent 800Mhz band switch on by EE, which is yet to be shared with their MVNOs, with the operator citing technical difficulties in part relating to VoLTE. Mobile asked Jacques Bonifay to confirm whether this was the reason and he answered, ‘I believe there may be a technical issue, but I’m questioning how motivated they are to give it to MVNOs as a service. I can accept that it comes in a second step but I don’t think it’s a priority for them, but it’s not my priority right now either but it will be soon.’
When Mobile queried whether the merger could influence reaching an agreement on the 800MHz band, the Transatel boss was more cautious, ‘Even though I said previously that the merger would be good for us, people and organisations don’t just change with a click, we will see.’