MVNO Monday Q&A – IIJ

6 Jun 2016

In a brand new instalment of the MVNO Monday Q&A, TeleGeography spoke with Futoshi Sasaki, the Deputy Manager of IIJ’s MVNO Business Management Office, and one of the founding members of the company’s MVNO unit.

When did you launch, who is your network provider, and has this partnership remained unchanged since launch?

NTT DOCOMO has been the host operator since the launch of our MVNO business in 2008, but we engaged in an additional partnership with KDDI in 2015.

How would you classify your MVNO’s business model?

We currently think of our business model as ‘Light MVNO’, although we have our own Packet Data Network Gateway (PGW)/Gateway GPRS Support Node (GGSN) to enable us to deliver our well-designed data plans to our customers, and to fulfil the data demand with flexibility. That being said, we cannot currently work with other operators apart from our host because we do not yet have our own SIM card and international mobile subscriber identity (IMSI) number. We are continuing to engage with this issue, and we hope to become the first Japanese ‘Full MVNO’ in 2017.

How would you define your key target user market(s)?

We have operated as an ISP for enterprise customers since 1993, so our MVNO business was targeted at the enterprise market since its launch in 2008. Now, we are also focusing on the B2C and B2B2C sectors, and these markets now account for over half of our subscribers.

Which areas of the market do you intend to target next?

Our next targets are the consumer market, inbound/outbound travellers and the machine-to-machine (M2M) and Internet of Things (IoT) sectors.

At the current stage of the company’s development, which of the following is most important to you: growing your subscriber base, increasing your ARPU, or increasing your profitability?

Growing our subscriber base is most crucial for us at the present time.

What is the size of your current user base?

We had 1.228 million subscribers at the end of March 2016, up 82% year-on-year. Almost all of our subscribers are post-paid.

What was your annual revenue for the most recent year?

In fiscal year 2015, the annual revenue of our MVNO business increased to JPY15.59 billion (USD143 million), up from JPY7.69 billion in FY2014 fiscal year, so the growth rate was more than double on an annualised basis.

What do you regard as the company’s biggest achievement since launching services? What have been the key milestones in your company’s development?

We were the first MVNO in Japan to offer LTE, having launched our service along with policy control and online charging features in February 2012. This initiative rapidly boosted our business and was the most effective driver in terms of us passing the one million subscriber mark at the end of 2015.

Do you consider the government and regulator’s positions regarding MVNOs to be conducive to a healthy market?

The Japanese telecoms regulator has a positive attitude towards the promotion of MVNOs and the introduction of healthy competition. I guess, however, some policies make the market too competitive!

Have you had any issues with wholesale pricing and access terms in your market?

No. The Japanese MNOs are obligated to make their wholesale prices public. This is designated by law, and is a key regulatory measure to ensure anti-dominancy.

Do you believe that the MVNO sector is already overcrowded? Do you expect to see the number of players reduced during the next five years, or is there plenty of room for niche operators?

There is severe price competition in the Japanese MVNO market, but the growth rate is still high. As such, I believe that there may be still room for manoeuvre in the market and, as such, some new MVNOs could enter the sector within the next five years.

Do you perceive a threat from established MNOs which may look to buy out successful MVNOs in order to protect their market share?

The former may pose a threat for us, but I do not think this is an urgent problem. The hostile acquisition of MVNOs by MNOs – merely to protect their market share – could prove controversial, at least in terms of how the market regulator might react.

Are you seeing rising competition from MNOs via their secondary, no-frills brands?

In Japan, there are two MNO secondary brands which started offering a no-frills services last year. Some of their offers are designed to attract customers who tend to like inexpensive, plain services – like the ones which MVNOs previously provided. That being said, however, these MNO subsidiaries are still reluctant to impact on their parent companies’ revenue too much. At this point in time they pose little threat to independently owned MVNOs.

IIJ already has a presence in other sectors – do you plan to link your other operations with your MVNO business?

We are not only an MVNO, but also an ISP, a Cloud operator and a systems integrator, so we have a number of advantages. In particular, we are able to provide a combination of fixed and mobile broadband for consumers, and we can also offer the applications on our Cloud network to our MVNO customers, which will be important in the upcoming IoT era.

With OTT apps increasingly supplementing/replacing traditional calls and SMS for voice and messaging, is there a danger that MVNOs will struggle to remain a valid proposition if markets continue to move towards data?

We have focused on data from the beginning, so we have no revenues which might be lost to OTT apps. For us, the growth of OTT apps is simply an opportunity in itself.

Finally, do you have any plans for future international expansion?

Yes. Under the appropriate partnership, we would offer an attractive international telecom service for our customers who seek to expand their business outside of Japan.

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