Growth factor

After gaining investment from OBIC at the end of 2012
Renna's CEO, Joakim Klingefjord.
Renna's CEO, Joakim Klingefjord.

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When Majan Telecommunication, which operates an MVNO in Oman under the Renna Mobile brand, won the backing of Oman Brunei Investment Company (OBIC) in December last year, it offered further vindication of the MVNO model in the Middle East and Africa.

Oman was the first country in the Middle East to grant licences for MVNOs back in 2008, but only two of the original five licencees, Friendi Mobile and Renna Mobile, remain in the market as operating MVNOs. But between them, they have proved the case for the MVNO model in the region.

OBIC acquired a majority share of Renna Mobile, which operates on the network of Oman’s incumbent operator, Omantel, towards the end of last year by injecting capital into the company. Renna, which commands a market share of about 3.5% of Oman’s mobile sector, compared to about 8% for Friendi Mobile, reached financial breakeven in mid-2011, and maintained this position until winning the backing of OBIC.

Renna’s CEO, Joakim Klingefjord, says that most of the new investment will be used to consolidate and strengthen its position in Oman. “Primarily it is to grow our customer base in Oman. It is then directed towards the working capital for doing so, which means sales and marketing activities, strengthening the distribution network, increasing our retail presence and generally strengthening the organisation.”

Shahram Hashemi, senior investment manager, OBIC, agrees, but also adds that he sees potential for Renna to expand beyond Oman. “We have taken a majority share and we have put in a significant amount of capital in order to reach the expansion plans for Renna. The capital is really to grow the business in Oman, to revitalise the company in Oman and at the same time we will be expanding the company outside of Oman. We will be looking at markets in the GCC and Middle East to expand the company.”

There are certainly numerous opportunities for MVNOs in the region, with Saudi Arabia due to licence three MVNOs – one for each of its mainstream mobile operators – this year, and other countries in the region also giving the MVNO model consideration.

In terms of assessing which markets to consider, Klingefjord says that the company must follow how all the regulations develop in countries across the region. “In one way you can say we are opportunistic – that is where a country opens up we will be there and we will be ready,” he says. “We have to be opportunistic where the regulatory framework allows and where we see we have a potential strong local partner. We will be one of the companies looking to enter Saudi Arabia,” he adds.

This is a view shared by OBIC’s Hashemi. “We really want to support Renna’s growth and for us as an investor, and as a strong financial backer we can provide Renna with the financial resources to expand. Markets have to be opened up by the regulator as oppose to some of the other MVNOs where they say they are going to be in these markets by certain years and they can’t really deliver on that because the markets don’t open up. So for us we will be more opportunistic to see what markets we can get in, but also the markets have to be in a position where we are allowed to come in.”

Klingefjord adds that the company will also consider brand licencing agreements if they can be made to fit with the company’s strategy. “You could say we are considering both. One is to get the point of presence in a market which means we will look at markets where it might not be a full MVNO with a full technical set up and might even go to the extent that we re-sell, but you do get the point of presence in a market.

“We will take a long-term view in that market, if we want to develop into a full MVNO or there might even be other licences available. We are technology agnostic, we will move where we think the benefits of what we have make sense,” he says. “We could launch in a different format in some markets without a full regulatory framework in place if we think it [the regulatory framework] is coming soon. That might happen.”

Market metrics

As of September 2012, Oman had a total of just over 5.1 million mobile subscribers, of which almost 4.7 million were pre-paid. The MVNOs had 556,000 mobile subscribers between them.

Klingefjord is not keen to divulge the number of subscribers that Renna has or give precise targets, but he adds that the company has “very aggressive growth targets”. He adds that this is the reason Renna has launched numerous new offers such as allowing its customers to make calls for the price of an SMS and even use free data at certain hours of the day.

Indeed, despite catering to more price conscious customers, 3G data services offer an area of strong potential growth. “It is one of our strong growth areas. We have managed to find price points were customer can have a lower entry point than others in the market and still enjoy the benefits of the fastest network, including data and even free usage after 11pm.”

Klingefjord says that the main challenge for Renna in Oman is to build on its existing customer base by ensuring that “a broader audience sees the value in its services”.

“This means that we have to work very hard to gain the confidence in the channels to carry our products so that we can have the same reach as the MNOs,” the CEO adds.

Analyst view

Oman was the first country in the Middle East to grant licences for MVNOs in 2008. As of September 2012, Oman’s resellers had an 10.8% market share of the country’s total mobile subscriber base, or about 11.8% of the pre-paid subscriber base, according to Oman’s TRA.

There is certainly plenty of room for the MVNO model to grow in the region, with only four or five countries in the region having adopted the concept.

Josep Que, a partner at Dubai-based telecoms research and investment firm Delta Partners, described MVNOs as being “almost non-existent in most markets” of the Middle East and Africa when compared to continents such as Europe. Oman and South Africa are the standout markets, with both countries having four to five MVNO licencees.

“In these two markets you can find not only some international brands like Virgin Mobile and Red Bull Mobile but also regional companies like Friendi,” he says.

“Jordan and Cameroon also have MVNOs, but overall in the MEA region there are around 15 active MVNOs, representing less than 2% of all currently active MVNOs in the world,” he says.

Que adds that in most countries there is no specific regulation regarding MVNOs. As such the existence of these players not only requires a positive business case and investors, but also the willingness of mobile network operators (MNOs) to host partners with this business model. “Some of these mobile operators miss the opportunity to see MVNOs as a partner that will complement their businesses by targeting niche segments where the operators aren’t very strong,” Que says.

 

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