Company Trend Analysis - 'No-Frills' Focus A Better Tactic In Nascent MVNO Market - NOV 2017

BMI View: Inka c el has acquired Virgin Mobile Peru and will target low-income customers in urban and rural areas. A more favourable regulatory framework for MVNOs and a more defined strategy gives Inkacel better upside than Virgin Mobile had faced . Despite that, it will likely have to compete with other new MVNO s, keeping margins low .

Virgin Mobile has sold its operation in Peru to Inkacel, little more than a year after launching. Virgin's decision to exit the market comes as subscriber growth stalled after April 2017 and difficulties were encountered with high interconnection rates and mandatory biometric registers at points of sale, forcing it to close about 1,200 of its retail centres. On learning of Virgin Mobile's decision, the regulator, Osiptel, said it would consider whether conditions of service between network operators and MVNOs need better regulation, in order to make the market more attractive. This implies Inkacel is more likely to see some success, as the regulator explicitly stated it would work to ensure favourable conditions for MVNOs.

We believe Inkacel is better positioned for success than Virgin Mobile was. Not only will Inkacel have better support from the regulator, but it also has a concrete strategy and it targets a specific aspect of the mobile market. Whereas Virgin Mobile targeted a general young audience, Inkacel explicitly targets very low-income users with a 'no-frills' service and a 'micro top-up' system that can top up as little as PEN0.5 (USD0.15) at a time, for customers that cannot afford common top-ups. Inkacel will inherit Virgin's agreement to use market leader Movistar's network, and it would also benefit from working with Bit el, tapping the latter's coverage of rural Peru, in order to reach rural low-income customers.

Few First-Time Customers Left In Mature Market
Peru - Mobile and 3G/4G Forecasts
f = BMI forecast. Source: Osiptel, BMI

This article is part of our Americas coverage. To access this article subscribe now or sign up for free trial