MVNO Hosting: Telfort Shows the Potential of Wholesale Business

In the saturated Netherlands mobile market, the third mobile operator, Telfort, has managed to increase market share 5 percent in three years and saw its value skyrocket from US$28m in 2003 to US$1.36bn in 2005, a 4,757 percent increase.  Telfort’s success is driven by its aggressive wholesale business line in addition to the traditional operator model.

Telfort launched its wholesale activities in 2001.  Upon its acquisition by Greenfield Capital Partners from O2 of the UK in 2003, the operator set up two business units.  One of the business units, the branded division, focuses on retail business, selling mobile service to Telfort customers.  The other unit, Telfort Wholesale, is dedicated to growing the operator’s wholesale business.  Telfort runs the two divisions separately; each unit has its own set of priorities and performance targets to meet. 

Telfort Wholesale currently sells network capacity to 9 MVNOs.  Telfort’s involvement in each operation varies according to the partner’s focus and expertise.   Some of the partners require heavy involvement by Telfort in service delivery processes as they may lack mobile operations expertise or opt for greater emphasis on sales and marketing. Others choose to take a larger role in delivering their services. In fact, Telfort Wholesale has developed three distinct business models it uses to determine its own role in the relationship.

Since the launch of a separate unit focusing on the growth of its wholesale business, Telfort has been very successful in attracting MVNOs to its network, penetrating new customer segments and increasing its total subscriber base.  At the end of August 2005, Telfort Wholesale accounted for 1 million of the operator’s total of 2.5 million subscribers.   Additionally, The Netherlands is a very competitive marketplace with a penetration rate of over 100 percent.  Telfort, through its wholesale strategy, has been able to provide mobile services aligned with specific customer segments’ needs and grow its total customer base by a whopping 1 million subscribers.  The operator’s market share increased from 10 percent in 2002 to 15 percent in 2005. 

Two key lessons can be drawn from the success of Telfort’s wholesale business: Setting clear goals for the wholesale business pays off, and MVNO hosting is an ideal way to grow market share and company value for a lagging MNO.