What is a virtual mobile network, why did Masan decide to spend 300 billion to acquire a new company that has been operating for more than 2 years and is losing heavily?

The Sherpa Company (under Masan Group) has just spent nearly 300 billion VND to buy 70% of shares in Mobicast (owns the Reddi mobile network brand) thereby expanding into the telecommunications field. Mobicast’s valuation is about VND 423 billion.

Established in 2016, Mobicast officially received the license to operate a virtual mobile network in 2019. Reddi focuses on young customers, providing customers with an online experience and aiming to transform into a super app based Mobile service at its core.

MVNO-type mobile service providers do not own the telecommunications network infrastructure, but cooperate with traditional mobile network operators (MNOs) to use transmission services based on the electric wave spectrum. together with MNO’s mobile network infrastructure to provide telecommunications services to consumers.

This is a win-win cooperation model: MNOs benefit from increased network utilization, while MVNOs have a lean business model by leveraging existing transmission and reception network infrastructure. available. In the world, MVNO is a very popular telecommunications business model. In the UK, for example, almost 20% of the total mobile market share belongs to MVNO carriers.

According to a research report released by ResearchAndMarkets , the global revenue of the MVNO market will witness a CAGR of 7.1% between 2021 – 2031, projected to reach USD 140 billion by 2031. Europe is forecasted to be the largest MVNO market. Major players in the global MVNO field are available: AT&T, Verizon Communications, T-Mobile, Lycamobile, CITIC Telecom International Holding…

Returning to Reddit, this network brand uses VNPT’s infrastructure to provide services to customers. Reddi’s common competitor in the segment is Indochina Telecom, a company of Bitexco Group that is the pioneer in MVNO in Vietnam.

Redi’s revenue was negligible in the first two years of entering the market, accompanied by a relatively large loss. However, this situation may change when the operator is integrated into Masan’s system.

In the statement, Masan said that expanding into the telecommunications sector is the first step for the group to digitize the “Point of Life” consumer ecosystem. Masan plans to reach customers in areas ranging from necessities, financial services to digital services, which account for 80% of Vietnamese consumer spending.

In the opposite direction, Reddi has exclusive access to Masan’s customer base through direct and online sales points nationwide. This is an advantage that helps Reddi significantly reduce customer acquisition costs and allows the company to use this savings to reinvest in the development of digital consumer solutions. Currently, 44% of mobile subscribers still mainly use voice and SMS services.

Masan is taking steps to integrate different products and services into VinCommerce’s point of sale. Since the beginning of the year, Phuc Long beverage brand, Techcombank’s financial service and now Reddi mobile service have been introduced into the system. Including the Phuc Long deal, Masan has spent nearly VND 650 billion on M&A to strengthen brands for Point of Life. VinCommerce is currently “going on two legs”, expanding the number of stores, increasing the number of services, besides still having to achieve the profit margin target.

When diversifying services, Masan will certainly gradually have to fine-tune its business model in addition to the ability of sales staff to become more multitasking. However, the effectiveness of the model still needs time to be proven. Besides aiming at the essential, improving the user experience is also a factor to pay attention to so that the quality is not inversely proportional to the quantity of services provided.