Mobile Virtual Network Operators (MVNO) had their peak in different European countries and in the U.S., basically due to the need to compete in environments with high penetrations indexes through channels coming from retail activities with recognized names. Generally they are specialized in specific customer segments and market their product through the pre-paid modality. There are basically two MVNO models. On one hand, the “pure” customers who buy mobile minutes and administer their own operations and those who buy a “key in hand” solution from a third party.

Although Latin America is very far from European penetration levels (80%) and that of the U.S. (82%), MVNO models could prosper within the intermediate term but with different activation factors. Up to now, the only experience in MNVO is that which the Santa Cruz cooperative (Cotas) has put into place since 2002. The Bolivian operator using the business brand Cotas Móvil, employes the Nuevatel network and has a little more than 50,000 customers, in a market in which another three companies operator and has 1.8 million users. The Bolivian case is only explained by the weak competition situation from Nuevatel, with a 12% market share, preferring to sell minutes ot the local cooperative as a way of becoming stronger in the country’s richest city.

In Argentina there is a similar situation looming to that of Bolivia with the next appearance of a new mobile company, Comarcoop that will be operated by the telephony cooperatives. Comarcoop will build its own stretch but it will also offer the main mobile operators to rent out its network facilities in areas where there is little interest in entering. The cooperatives hope to earn a million mobile lines in the “middle of the provinces” in Argentina. They estimate that most of them will come from existing customers that will “rob” operators at the national scale. They will appeal to the “economic reasonability” of cell companies to let them operate in specific areas in exchange for paying rent.

Argentina is a paradoxical case since it is the only South American country that included the MVNO figure in its market opening regulation. In fact, in 2001, the Communications Secretary (Secom) extended a permission to Millicom to operate under that modality. However, the company was never able to seal a wholesale agreement with any of the operators. In 2004, an Argentine and Israeli capitals company created the change of obtaining a license to implement an MVNO service through marketing SIM cards for public telephony. The permission was denied since new Secom authorities have postponed an infrastructure competition plan. Due to this, although Comarcoop has included a possibility for incursion in MVNO plans in its business model; it reserves the right to state it so specifically.

In Chile and Brazil, the panorama is similar for different reasons to the European scenario. Chile has already exceeded 60% penetration in mobiles and Movistar (Telefónica and BellSouth) has accumulated 48% of the market. The Telecommunications Undersecretary (Subtel), the Chilean regulator, could eventually enable the MVNO model to avoid a standstill in penetration or a fixed price situation. The organization is promoting the same policy on fixed services – through unbundling – for carrying out the objective of making final prices in broadband fall to reach penetration levels of the service similar to those in developing countries. In any case, there are those whom draw the conclusion that the MVNO model could crop up “spontaneously” if the cable TV operator VTR decides to launch a “quadruple play” offer. VTR currently offers TV, broadband and fixed telephony; it only lacks mobility to compete on equal ground with Telefónica. However, on the current concentration situation, it is likely that Smartcom, having 15% penetration, will not take much time to become its wholesale provider. VTR has an invaluable resource: communication media to bombard the public with advertising its offer.

In Brazil, incoming MVNO could appear in the next 3G band bid. The auction is recently expected for next year and it is predicted that contest winners would concentrate their deployment in the main urban centers in the country where the most high-speed services are required. It is there that the situation is similar to what occurs in Europe and the U.S. In the major Brazilian cities penetration levels are high: Brasilia 99%, Sao Paolo has 53% and Rio de Janeiro with 42%. In other words, to make room for future 3G operators, whether they be entering or existing companies, they must appeal to specialized channels that help them to divide up the offer through adaptation. One of the most interested parties in the Brazilian contest is the English Vodafone that in its own country operates as an MVNO wholesaler.

Although the Chilean and Brazilian cases are highly hypothetical, they will have to pay close attention to what happens in Argentina. The MVNO proposal to operate in non-profitable areas would not adjust to, for example, the Telefónica Móviles objective of improving its financial variables to improve profitability. However, in middle of the brand change and the commercial war with América Móvil, the MVNO model would be a change to make marginal areas profitable.

MMNO competes for Spanish-speaking segment in U.S.

The offer in the U.S. for the Spanish-speaking segment has begun to unravel through virtual operators (MVNO). With more than 40 million people who speak Spanish, the U.S. market is the second most important in the region due to the quantity of potential customers and it is the biggest if you consider that the average ARPU is around US$ 50.

Movida Communications was recently launched in a society among the Cisneros Group, Sprint and Wal-Mart. The market will be disputed with InPhonic who will launch the new MVNO in Spanish under the brand Viva Liberty. Although different versions indicate that Movida hopes to implement its model in Venezuela and Peru, the version was denied by the company to Convergencialatina.