EUROPEAN NETWORK OPERATORS SHOULD ADOPT A PORTFOLIO MVNO STRATEGY,
FORRESTER ADVISES

AMSTERDAM, 16 August 2001 . . . European network operators' reactive view
of MVNOs (Mobile Virtual Network Operators) suffers from shortsightedness,
according to a new Report by Forrester Research B.V. (Nasdaq: FORR).
Instead of hosting a few brand-oriented MVNOs out of fear, network
operators should adopt a portfolio strategy that spreads risks and draws
benefits across three types of MVNOs, resulting in expanded market reach
into niche consumer segments, optimized network capacity utilization, and
growth of data applications. Forrester Defines an MVNO as "a company that
buys network capacity from a network operator to offer its own branded
mobile subscriptions and value-added services."

"Unlike familiar service providers which simply resell operator-branded
subscriptions, MVNOs go further by applying their own brand and offering
unique value-added services. We expect MVNOs to pursue a continuum of
operating models and become a permanent fixture in Europe's mobile industry
over the next five years," said Forrester analyst Michelle de Lussanet.
While arguments rage as to whether network operators see a net profit gain
by hosting MVNOs -- these arguments miss the point. Network operators will
have no choice but to host MVNOs over the next five years as regulators
demand competition, network operators need to fill spare capacity, and
saturation calls for marketing help. While a few network operators actively
pursue the MVNO hosting business, the vast majority see MVNOs as a
necessary evil, and plan to host just a few, and see only big consumer
brands -- stereotyped by early UK entrant Virgin Mobile -- as important
MVNO candidates. If operators continue in this reactive approach, they will
permanently damage their position by lagging competitors, missing new
opportunities and failing to diversify risk."

Instead of simply reacting to rivals or reluctantly trying to please
regulators, Forrester advises that network operators need to maximize MVNO
potential with a portfolio strategy. This approach balances risks and draws
benefits from three types of MVNO candidates -- Media, retail, and
financial services firms that typify the brand MVNO; fixed, cable, and
mobile telecom firms; and device MVNO candidates, which might come from the
automotive, entertainment, or utilities industries.

"The MVNO portfolio strategy applies to all types of operators, whether
small or large, new or established -- only the percent of capacity
allocated to MVNOs will vary," de Lussanet added. " To keep benefits and
diversify risk, network operators must exercise restraint and keep the
portfolio balanced as the three overlapping waves of candidates emerge. To
pick winners, operators should select candidates with a clear link between
mobile services and the core business and favor candidates with sound
segmentation strategies and sign long-term, exclusive agreements.

"Only a few telecom players will find it necessary to be in large markets
like Germany or the UK, and deals by 3G operators to roam on 2G have a
limited lifetime and no need for renewal. Also, only a limited number of
fixed players will enter as a mobile telco MVNO since the need for bundled
services remains unsure. Network operators should strike deals with telco
MVNOs based on estimated capacity requirements and availability of
bilateral agreements. Brand MVNOs will boom and bust and within three
years. Long development cycles and the wait for cost-effective high-speed
mobile networks will delay device MVNOs. Network operators should not wait
but should proactively form a business development team to cultivate device
MVNO opportunities now. They should limit the number of device MVNOs hosted
based on ability to meet SLAs and also should steer clear of candidates
with unattainable demands."

For the Report "Turning MVNO Pain Into Gain," Forrester spoke with 30
senior executives at mobile network operators across Europe