Virtual operators cannot indulge in a vicious price war

As of the end of 2013, there were more than 1,100 mobile virtual operators in the world, most of which were located in developed regions such as Europe and the United States. In overseas mature markets, the market size of mobile virtual operators accounts for approximately 7%-10% of the overall market, with 14% in the Netherlands, 10% in France, 19% in Germany, 13% in the United Kingdom, and 7% in the United States. Market scale in other regions is relatively small. Small, only about 3%.

China's telecom industry is undergoing a period of transition from extensive user scale growth to refined user value enhancement. Voice messaging is gradually being marginalized and refined data traffic operations are becoming the center of gravity. The further opening of the mobile resale business to the introduction of virtual operators will further accelerate the transformation of the industry.

In terms of long-term development, the virtual operator market has a bright future. However, it is worth noting that, at this stage, the business of China's virtual operators has not yet landed, there are still many constraints in the future development and growth, and its road of development and growth is still full of thorns.

First of all, virtual operators themselves do not own physical networks and rent networks from the three basic operators to provide telecommunication related services. This precondition causes virtual operators to be at a disadvantage in bargaining, and the overall interest value space is limited by people; Although virtual operators have their own certain resource advantages, they lack the operating experiences and operating teams of the telecommunications market and are difficult to form a competitive force in a short period of time. However, in the research and development of billing systems, customer service systems, and value-added services for communication services, Virtual operators have weaker research and development in this area, and technological innovation is a short board. Third, from the perspective of international experience, virtual operators typically spend 4-6 years to recover their investments, and operate for 3-5 years before they can make profits. Such a long period of return on investment remains overwhelming for private capital; in the end, there will be many uncertainties in terms of interconnection, user development, business models, service standards, etc., and there are still constraints in the development of virtual operators.

For virtual operators, after a huge investment in the early stage, how to smoothly start a business and earn profits through the cost period is a test. Due to the large number of virtual operators, market competition will be fierce in the initial stage of market expansion. Many licensed companies have also proposed their own innovation plans. Even though companies such as Dixon, Tianyin, and Suning have received licenses, they have said that they do not have to fight price wars. However, in the early days, virtual operators will inevitably appear to develop users. The price war is tilted and even appears for free. After all, for virtual operators during the trial period, attracting users quickly is the primary issue in solving the problem of survival, and the price war in the face of clients is inevitable.

However, if the virtual operator only relies on the traditional resale business, trying to obtain a more favorable tariff, and earning a mobile resale difference, it will not only “make money” itself, but will also have an adverse impact on the development of the entire industry. On the one hand, because the competition in the mainstream market is also extremely fierce, the prices of basic communications services have been declining year after year, the price war space has shrunk severely, and virtual operators have not had the long-term strength to fight price wars; on the other hand, the focus of telecom operation industry has shifted to networks and With the perception of application experience, prices are no longer the only measure, and purely vicious price competition among virtual operators will only damage the original ecosystem and inhibit the development of technological innovation.

Price competition is only the initial means of the market, not the main purpose of competition. Virtual operators should not indulge in the misunderstanding of the “vicious price war” in market expansion. Virtual operators should rely on their own talents to integrate resources and innovate in models. Differentiated services for market segments are where virtual operators come from.