Telenor Xpress 4 - 2000

VIRITUAL MOBILITY

How do you set up a mobile phone service if you don’t have a network? Lease capacity from network operators like Telenor.

Mobile Virtual Network Operators (MVNOs) are a growing trend in the cellular scene. The idea behind them is simple: lease capacity on an existing mobile network then sub-contract to end-users in a different form. As the owner of a lucrative GSM network with 94 percent coverage in Norway, Telenor has been receiving a lot of calls lately from venture capitalists seeking leasing agreements. For Telenor, earning revenue related to its long-term network investments is a win-win situation.

CASE: SENSE COMMUNICATIONS
As always, the key to a successful partnership lies in co-operation. In early 1998, Net System International (later renamed Sense Communications) indicated an interest in renting capacity from Telenor. When the two sides failed to agree on the terms of a contract, Sense Communications appealed to the Norwegian Post and Telecommunications Authority. However, like many of incumbent telecoms throughout Europe, Telenor regarded its national infrastructure as a long-term investment and was unwilling to share revenues through straitjacket regulations. As a result, the Norwegian Ministry of Transport and Communications denied Sense Communications access to Telenor’s network.

Telenor’s Petter Bliksrud explains: “We made tremendous investments in the GSM network – not only in high-traffic areas, but also in areas that will have reduced profits. If competitors want to compete with us, they must be exposed to the same risk and costs of investing in infrastructure. Telenor rejected the terms of contract – not the idea.”

VIRTUAL OPERATORS
Since then, many issues have been ironed out and innovative technologies and new business opportunities have enlarged the market for renting airtime. As of autumn 2000, some 20 operators are gearing up to sell mobile services in Norway. About half of them will be renting space on Telenor’s network.

Petter Bliksrud of Telenor Mobile welcomes the new operators. “Naturally, we want to protect our market. Regulatory intervention should not pave the way for newcomers seeking nothing more than a piece of the mobile ‘pie’. However, we welcome new operators if they intend to make ‘pie á la mode’– enhancing the market’s appetite by adding value.”

To facilitate such a win-win situation, Telenor devised a new system for renting out capacity on a service provider basis. It allows virtual operators to offer their customers special deals, independent of Telenor’s pricing policy. Telenor furnishes the virtual operator with SIM cards, second-line support and billing information. Since Telenor’s SIM cards are used, Telenor’s roaming agreements still apply for international roaming. However, for all intents and purposes, the customer deals solely with the new operator.

ADDITIONAL SERVICES
– WHAT WILL THE FUTURE BRING?
The success or failure of virtual mobile operators relies entirely on how the market develops. While no one believes the new players will win much of the voice market away from the established network operators, they may have more success marketing services which will be available soon. It is in marketing these services that Espen Torgersen, an executive at Sense Communications, regards Telenor as an strategic partner, not a competitor.

“Our business concept is to provide the most user friendly communications services to youthful customers. Sense will be the first to meet customer demand for enhanced value-added services that make sense for customers,” Torgersen says.

Torgersen went on to explian that unlike a PC, a mobile phone will always be online. “It knows where you are, and it knows who you are making it easier to send targeted information.. Based on our experience with WAP and SMS, we know that customers are interested in, and willing to pay for, the cellular services they find relevant. The popularity of cordless handsets shows that users want as much independence and mobility as possible,” Torgersen says.

Telenor’s Petter Bliksrud agrees: “This market is so vast and unpredictable that Telenor will not and cannot outcompete all the new players. As soon as the hardware becomes available, a whole new world of data services will emerge. But we can’t do it all.”

Although Telenor is continuously expanding its commitments on the international mobile market, the company recognises that network ownership offer more opportunities than simply providing a full range of emerging services. By pursuing such a prudent strategy, Telenor is expected to win its fair share of the market.



Text by: Marius Revold