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Mobile services

Is Hue an MVNE Trendsetter?

In the days when reality was unaugmented and digital natives were unknown, telcos were the sole providers of the services that ran over their networks. Mobile operators grew fat on the back of old-fashioned voice calls and text messaging. The reversal has been startling. Today, all of the value to the telco is in the network capacity that other players use to reach customers. Operators are not really service providers; they are service enablers.

Taken to its logical conclusion, this trend could see operators evolve entirely into support functions, providing the infrastructure and systems for more popular brands to address consumer needs. The so-called mobile virtual network enabler (MVNE) is, perhaps, an example of this paradigm. Could the likes of Hue, an MVNE that sprang up last year, be the shape of things to come?

An offshoot of Hong Kong's Hutchison Whampoa Ltd. (Hong Kong: 0013; Pink Sheets: HUWHY), which has a 3 Group brand that runs networks in several European countries, Hue was launched in April 2015 with a mandate to help non-network companies launch mobile services, and become what are known as mobile virtual network operators (MVNOs). Since then, it has kept a low profile, declining to give interviews and making few public announcements. Progress at the business appears to have been slow going while it firms up its product portfolio and technology strategy. But a deal with Google (Nasdaq: GOOG) last month may be a promising harbinger, persuading other aspiring MVNOs to look more seriously at its services. (See Hutchison Courts MVNOs With Global MVNE.)

While MVNEs are nothing new, Hue stands out from most others in several ways. For one thing, it aims to address multinational rather than single-territory needs. In the past, a company trying to set up an MVNO in more than one country may have needed to strike deals with a different network operator in each market. Add to that the complexity of negotiating arrangements with local regulators and other players, and the overall task looked daunting.

Hue promises to relieve third parties of that burden by acting as a single point of contact for its customers. It can rely on networks owned by Hutchison in the markets of Austria, Denmark, Italy, Ireland, Sweden and the UK. Elsewhere, it aims to negotiate deals on behalf of its customers with local infrastructure players, such as Orange (NYSE: FTE) in France or Deutsche Telekom AG (NYSE: DT) in Germany.

This may well have attracted Google. Under the deal signed last month, Hue is providing European roaming services for customers of Project Fi, Google's US MVNO. So far, that arrangement does not cover markets where Hutchison lacks a network presence, according to a Hue spokesperson. But if Google is eyeing a bigger role in Europe, Hue could be an ideal partner. Moreover, in the US, Project Fi has announced tie-ups with several networks so that it can choose the highest-quality service in a particular neighborhood at a given time. Hue might be able to facilitate similar arrangements overseas. (See Is Google Becoming a European MVNO?)

Hue's timing also looks fortuitous. As the mobile Internet becomes ubiquitous, access prices fall and web services take off in emerging markets, speculation is mounting that big brands are plotting multinational MVNO moves. Burgeoning interest in the Internet of Things (IoT) could also aid Hue: In markets like asset tracking and logistics, companies need connectivity arrangements that span numerous territories.


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Digitalization and the arrival of technologies like SDN and NFV should provide a further spur to the MVNE/MVNO set-up. By running billing, CRM and other IT systems over the cloud, MVNEs can burnish the service they offer customers without these capabilities. Digitalk Ltd. , a MVNE partner of Vodafone Group plc (NYSE: VOD), has already made investments in a cloud-hosted MVNE platform. The "agility" that is supposed to come with SDN and NFV will enable MVNEs to support MVNOs more flexibly -- spinning up services in a particular area as and when needed -- and improve the business case for MVNOs. (See Vodafone UK Strikes MVNE Deal With Digitalk.)

None of this means Hue will be a success. Apart from Google, an Austrian MVNO called eety remains the Hutchison subsidiary's only customer, suggesting there have been some teething problems. Other network operators with global operations could probably replicate Hue's model, if they so wished. With MVNOs widely blamed for price-based competition in Europe, embracing the MVNE role will seem like self-harming behavior to many operators. What's more, companies that have already flourished as so-called over-the-top (OTT) players might have little desire to become MVNOs, given all that would entail.

For others, however, taking advantage of rosier economics and emerging technologies to become MVNOs, and nudge unpopular network operators to the side, could make perfect sense. And as network operators begin to view OTT players as valuable partners, instead of troublesome parasites, they too may warm to the idea of becoming MVNEs. Hue might just be a trendsetter. (See Kevin Lo's Move to Facebook: Sign of Things to Come?)

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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