QUALITY INNOVATION PROSPERITY / KVALITA INOVÁCIA PROSPERITA 20/2 – 2016 69

Design of an Innovative Business Model for Mobile Virtual

Network Operators
DOI: 10.12776/QIP.V20I2.772

Miroslav Spaček, Emil Vacík

Received 21 August 2016, Revised 26 October, Accepted 12 November 2016

ABSTRACT
Purpose: The article studies a possible innovative business model for sustainable
competitive advantage in current communication technologies.
Methodology/Approach: This ethnographic approach consists of contextual
interviews with company managers and specialists. Scientific observation and
comparison took preference over other methods for the evaluation of results.
Comparison methods were used for comparing price levels of telecommunication
services within OECD countries and used for characterizing virtual operators.
This method of modelling was applied to both corporate process-design and
functions.
Findings: This paper proposes a normative model as the foundation for a virtual
operator that would be generally applicable by any potential newcomer to the
budding virtual telecommunication market.
Research Limitation: Business model innovation in the virtual mobile operator
area is a quite new concept, which is still under development. For that reason the
validation of the model has not been fully completed until now.
Originality/Value of paper: The paper demonstrates this quite new approach to
business model development and its possible application in the area of virtual
mobile operators.
Category: Conceptual paper
Keywords: virtual operator; telecommunications; business model innovation;
sustainable innovation; structural modelling.

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1 INTRODUCTION
The establishment of a new business model in a newly developing business area
such as mobile operator network services is always a great challenge both for
newcomers and incumbents. Based on the commonly accepted idea that
functional business models are valued above technical perfection of the product,
newcomers using a well-established business model can often outplay
incumbents.
The quickly developing branch of mobile operator services has undergone radical
changes over past ten years. The mobile virtual operator establishment
implemented some quite new business models, ambushing the existing oligopoly
structure of operators while offering quite cheap and flexible services. This so
called ‘‘disruptive innovation’’ represents a process whereby a smaller company
with fewer resources may successfully challenge established incumbent
businesses (Christensen, Raynor and McDonald, 2015).
The establishment and implementation of a new business model in order to be
feasible and functional should be subject to certain formalised principles to avoid
either misconceptions or failures. These ‘‘normative models’’ usually combine
theoretical principles with empirical findings to arrive at a structured process for
implementing the process in question. ‘Business models’ explain who your
customers are and how you plan to make money by providing them with value;
strategy identifies how you will beat competitors by being different’ (Abraham,
2013).
Business model innovation usually represents fundamentally different method of
making money compared to any previously well established and perceived
processes. Business model innovation is viewed as a powerful way to transform
existing markets or create entirely new ones (Giesen, et al., 2007). The new
business model as a breakthrough innovation concept has already been addressed
by various authors (Davila, Epstein and Shelton, 2006; Tidd, Bessant and Pavitt,
2007) and is considered an important source of competitive advantage and
business performance.
Information and communication technologies (ICTs) offer unprecedented
opportunities to rearrange value creation activities in new and different ways. In
order to go deeper into this principle, the authors of this article examined new
business model functions in the information technology business branch. Opting
for this business area was driven by the fact that it has become almost the daily
assignment for management to undergo rapid development and simultaneously
look for new competitive advantages.
Over the course of time telecommunication companies have nearly exhausted
new technology possibilities and all operate on equal technological standards.
For instance, all three telecommunication operators in the Czech Republic1 offer

1
O2, T-Mobile and Vodafone

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the same technological platform and quite equal levels of technical support to
customers. Moreover, their pricing policies, notwithstanding intrigue and hardly
understandable tariff bundles, also lost their magic to attract customers. One
possible way to find a way out of this problem is to embark upon a new business
model, which might help all parties concerned – the current operator, new
(virtual) operator and end-users. Such an idea, when transformed into a full
operating model should result in a win-win-win situation, where all three parties
involved in a new business can score success.
Searching for well-designed and functional business model in the mobile
operator branch showed that such a normative model had not yet been developed.
We hope to close this gap with our study. The normative model describing the
key procedural steps for the establishment of virtual mobile operator represents
the main benefit of this paper.
These conclusions are supported by the recent development of the market share
of virtual mobile operators in the Czech Republic as shown the Table 1.

Table 1 - Market share development of virtual mobile operators in the Czech

Republic
Year 2011 2012 2013 2014 2015
Market share (%) 0 0.06 1.15 6.53 6.81
Source: ČTÚ (2016)

2 THEORETICAL FRAMEWORK
Despite lacking a commonly accepted definition of the concept (Zott, Amit and
Massa, 2011), business models can be understood as a firm´s comprehensive
‘design or architecture of the value creation, delivery and capture mechanism’
(Teece, 2010). Their main objective is to serve a company by commercialising its
ideas and innovations. Business models comprise all elements relevant to the
value offering provided to the firm´s target customers, including internal and
external value creation as well as its underlying resources and capabilities, along
with the revenue generation logic applied by the firm. The logic of customer
value resides at the core of business models. Value creation results either from
the efficient provision of existing or generating new value propositions (Zott,
Amit and Massa, 2010).
Amit and Zott (2012) define the business innovation model by three primary
elements: (1) content – the activity to be performed, (2) structure – how and in
what sequence activities are linked, (3) governance – which performs the
activities. Osterwalder and Pigneur (2010) declare the roots of the business
model as the rationale for how an organization creates, delivers and captures
value. Keeley, et al. (2013) characterises business model innovation by the
number of attributes of a business that are changed.

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Sustainability is one of set values that are increasingly a driver and target of
business model innovation. Sustainability of business model innovation
repeatedly explores the innovative business models that support sustainable
technologies (Goebble, 2014). Such business model innovation is a method for
firms to re-conceptualise the purpose of the firm and its value-creation logic to
improve both its environmental and social sustainability (Bocken, et al., 2014).
Business model innovation is recognized as a key to the creation of sustainable
business (Carayannis, Sindakis and Walter, 2015). Business model innovations
for sustainability are innovations that create significant positives or significantly
reduce negative impacts for the environment and/or society, through changes in
the way the organisation and its value-network create, deliver and capture value
or change their value proposition (Bocken, et al., 2014). Bocken, et al. (2014)
introduced a more comprehensive view of how firms should approach
embedding sustainability in their business models, by introducing sustainable
business models innovation archetypes. These are introduced to develop a
common language that can be used to accelerate the development of sustainable
business models in research and practice (Laukkanen and Patala, 2014).
Business innovation models are conventionally focused on the firm´s internal
strategic activities, but these activities are greatly affected by the institutional
environment in which the firms operate (Zott and Amit, 2007). They describe the
rationale of how organisations create, deliver, and capture value (Osterwalder
and Pignneur, 2010).
Changing markets and environmental forces have caused established firms to
constantly rethink their existing business models, providing a new source of
competitive advantage. A business model is described as a system of independent
activities and it manifests in the causal relationship between choices and
consequences (Casadesus-Masanell and Ricart, 2010). In one case an innovative
business model occurs when a business model is invented in response to a
demand and is then successfully implemented in practice. In a second case the
new business model is required by the market. In both cases it is unclear at the
beginning whether the business model will be useful as a market solution, or
which business model will respond best to the demands of the market
(Chesbrough and Rosenbloom, 2002).
An innovative business model can be a principal-based innovation or gradual
with marginal changes (Bourreau, Gensollen and Moreau, 2012). Every company
must design its own business model according to specific individual
circumstances. Business model innovation as a new form of innovation plays a
major role in sustainable company success, and is a tool for transformation and
renewal (Demil and Lecocq, 2010). Competitive advantage must be built on
strategic assets, such as a unique product, differential power in the channel, a
speed to market advantage or some form of informational advantage. While
business model innovation may require new capabilities, these new capabilities
will constitute business innovation only when they significantly disrupt the
competitive dynamics of an industry (Euchner and Ganguly, 2014).
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Opportunity exploration is commonly characterised as a multi-step process,

involving various levels that lead from a broad idea to a feasible solution
(Dimov, 2007). Opportunities involve the potential to generate some type of
profit and involve certain kinds of improvement, innovation or imitation to
compensate existing market inefficiencies (Singh, 2001). Being prepared in terms
of constantly scanning the environment, connecting pieces of information, and
evaluating the derived information are considered dimensions of individual´s
alertness (Tang, Kacmar and Busenitz, 2012).
Teece (2010) or Baden-Fuller and Mangematin (2013) interpret business models
as ‘sets of cognitive configurations that can be manipulated in the minds of
managers’. Business model innovation requires strategic agility and
entrepreneurial actions on the part of decision-makers (Sosna, Trevinyo-
Rodriguez and Velamuri, 2010). A major managerial challenge is to counteract
or at least alleviate the inhibiting impact of established dominant business logic
and historically grown path-dependency in innovation decisions into new value
proposition opportunities (Sydow, Schreyögg and Koch, 2009). Cognitive
ambidexterity, e.g. the combination of analytic logic and affectively charged
intuitive pattern recognition in strategic decision processes of leadership
managers, fosters firm-level entrepreneurial behaviour (O´Reilly and Tushman,
2013).
Changes in social technologies can be considered an integral part of business
model innovation, defined as adding new activities or changing existing activities
in the operations of a business. Therefore, sustainable business model innovation
involves the development of new social technologies that advance the
sustainability of a firm. Business model innovation allows managers to resolve
the apparent trade-off between innovation costs and benefits by addressing how
they do business, for example, by involving partners in new value-creating
activity systems (Amit and Zott, 2012).
Innovation systems can be considered the broader institutional structures that
support technological innovation, including elements such as universities,
governmental funding programs and regulations (Nelson and Nelson, 2002).
Regulations shouldn´t be formed around short-term political interests, but on
long-term societal trajectories for sustainable innovations, which could also
support a diverse set of alternate sustainable innovations, increasing sustainable
development from the broader view. Business activities further need to
collaborate with their stakeholders on sustainability issues, and also with each
other to form common norms that support sustainable business model innovation.
Even under conditions of resource scarcity, organizations do not need to
renounce innovation as a way of enhancing their performance prospects (Amit
and Zott, 2012). An innovative business model can either create a new market or
allow a company to create and exploit new opportunities in existing markets.
Dell, for example, implemented a customer-driven, build-to-stock model of
selling computers through retail stores (Brynjolfsson and Hitt, 2004).

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The innovation of business models in established firms can be categorised as a

strategic investment of firm resources for future value creation, and the cognitive
lens offers the potential to unravel respective processes of managerial thinking
which lead to this kind of decision making (Baden-Fuller and Mangematin,
2013). Business models tend to be complex, as they represent boundary-spanning
entities which link dimensions of corporate strategy, technological capabilities
and innovation processes of the firm (Casadesus-Masanell and Ricart, 2010).
Business model innovation is characterised as an ongoing learning process that
relies on discovery and trial-and-error (Smith, Binns and Tushman, 2010). Firms
attempting to pursue business model innovations must overcome barriers such as
obstruction and confusion among employees (Chesbrough, 2010). Of course,
every company must assimilate these models in its own way, to accommodate its
own internal culture and external environment (Euchner and Ganguly, 2014).
Doing so successfully requires executives to overcome entrenched perspectives
and cognitive biases, and it will almost certainly require changing the
organizational culture to some extent (Evans and Johnson, 2013).
Slywotzky (2002) outlines 23 distinct business models, including the experience
curve, cost leadership, multicomponent profit, and the dynamics that make them
work. Business Model Canvas (Osterwalder and Pignneur, 2010), which is based
on generation by brainstorming, is often criticised due to missing coherence or
the relationship among elements (Euchner and Ganguly, 2014). It consists of nine
building blocks: (1) customer segments, (2) value propositions, (3) channels, (4)
customer relationships, (5) revenue streams, (6) key resources, (7) key activities,
(8) key partnerships, and (9) cost structure. The Business Model Canvas
approach can be used to carry out a full SWOT analysis of a company. It can be
even used to seek out ‘blue oceans’, which are new value propositions that aren´t
embattled by rivalries (Abraham, 2013).
Business innovation modelling represents a conscious renewal of firm´s core
business logic. Teece (2010) emphasises that the reliability of the business model
architecture to generate and capture value depends on a deep and comprehensive
understanding of customer needs. A company´s business model must be changed
if its ability to create, deliver, or capture value declines (Kaplan, 2012).
The business model doesn´t work, if an organization has completed a
considerable strategic or organisational change (reengineering, acquisition etc.)
For those types of things, strategies and strategic analysis are needed (Abraham,
2013).

3 RESEARCH QUESTIONS AND METHODOLOGY USED

Our research is based on a comprehensive literature review (Boote and Beile,
2005) in the areas of system theory and business model innovation research. By
the use of existing contemporary literature reviews we attempted to analyse
system approaches that can be best applied to business model innovation drafts.

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Because there is not a commonly shared understanding of business model

innovation content in the resources reviewed, it was necessary to carry out a
critical analysis of the outputs and confront their applicability for the specific
purposes of this research.
Research questions raised in the context of this paper are in consonance with the
gap earlier disclosed in this paper. Over the past years the business model has
been developed by telecommunications companies, but its implementation phase
was not addressed at all: (1) is such a business model feasible in this
environment? (2) What are the requirements for partial procedural steps of the
business model? (3) Are formulated procedural steps valid and relevant for both
parties concerned (mobile operators and virtual mobile operators)?
Ethnographic research became due to the need of doing contextual interviews
convenient methodological tool (Dey, 2002). Contextual interviews were applied
to the group of company managers and specialists who were actively involved in
the design of a new business model. As methods used for the evaluation of
results, scientific observation and comparison took preference over others. The
comparison method was used for comparing price levels of telecommunication
services within OECD countries while the explanation was used for the
characterization of virtual operators. This method of modelling was applied to
corporate process design and functions.
The practical aspects of the research were explored in the rapidly changing
telecommunication business, which after years of decent oligopoly competition
faces upcoming distribution of new frequencies as well as entering new virtual
operators.

4 SPECIFICATION OF A VIRTUAL OPERATOR

The fundamental difference that distinguishes standard and virtual operators is
their access to infrastructure. A virtual operator operates as a provider of
telecommunication services to end users without either the possession of full
infrastructure or the licence for using radio frequencies.
Such an operator usually declares its corporate identity through its own brand. A
virtual operator is marked by the abbreviation MVNO (Mobile Virtual Network
Operator). Due to existence of various types of virtual operators, their definition
is often excessively general. As an example, the British telecommunication
market regulator defines a virtual operator as ‘The organization which offers
telecommunication services to customers without possession of broadcasting
time’ (Ofcom, 2004, p. 17). According to the International Telecommunication
Union (ITU) definition: ‘Mobile virtual operator is an operator which offers
telecommunication services, but it doesn’t licence for radio frequencies. Usually
it assigned an identification number, by which it logs in into network and in

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many cases it issue as SIM card (ITU, 2011)’. The first Czech virtual operator
BLESKmobile further extended the definition of ITU by factors of marketing,
distribution and customer support (RAS, 2012, p. 5).

4.1 Virtual operator models

The term MVNO (Mobile Virtual Network Operator) is ambiguous. It contains
more attitudes to functions, strategy and technical solution. The main models of
MVNO are characterized as branded reseller, service operator and full MVNO,
which are mostly contractually bound to a traditional network operator MNO
(Mobile Network Operator). Typically three possible models of mutual
relationships among MNO, MVNE and MVNO are described (Špaček and
Štěpán, 2013). In the traditional model, is the only provider MNO. In the
MVNO model, is the infrastructure hired and services are offered to customers
under its own brand. MVNE (Mobile Virtual Network Enabler), hires technical
solutions, which are afterwards leased to MVNO. The general trend seems to be
an evolution towards an MVNO with ownership of the entire core network
architecture and where MNO is buying access to it (Balon and Liau, 2012).

4.2 Virtual operator value chain

Fig. 1 describes in detail the value chain of individual types of virtual operators.
This value chain breaks down provider operations into individual processes.
From the point of view of strategy, one must clearly define the processes that are
sources of competitive edge. The only viable model of virtual operator is that
which brings competitive advantage and is able to successfully compete on a
telecommunication market which is becoming more competitive than ever.
The MVNO (Mobile Virtual Network Operator) potential to reach success was
tested against a business environment structure (Shin, 2008) and revealed that the
business environment structure can significantly influence the position of
MNVO. In case that MNO (Mobile Network Operator) is vertically integrated,
this operator is then able to charge monopoly prices and thus the ability of
MNVO to offer services is constrained.
From this point of view a horizontally layered structure seems to be more
inviting for MVNO. For this reason, MVNOs which operate in West European
markets are far more successful to be compared with competitors acting in Asia.
Applied pricing policy is to a large extent influenced by both the level of
oligopoly strength of the MNO (Le Cadre and Bouhtou, 2012) and the behaviour
of other MVNOs (Zhao, Zhu and Zhu, 2012).

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Adapted according: NSN (2004, p. 4)

Figure 1 - Types of mobile operators

A Brand reseller aims to provide customers with services and building their
own brand. A branded reseller doesn’t own any infrastructure; it hires a
comprehensive technical solution from either an MNO or other virtual operator.
Branded resellers manage the image of their own brand and distribution channels
as well. Notwithstanding a brand reseller’s direct contact to end users, all data on
customers and accounting administration is arranged for by their business
partner.
Such a partner is directly bound by contract to the brand reseller’s customers.
The brand reseller’s profit margin is derived from the difference between the
wholesale price of a one minute call, which is paid to the host MNO, and the
retail price which is settled by the end user. The nature of saving costs for the
brand reseller is accomplished by using the same distribution network as the
parent company.
BLESKmobil uses identical distribution channels such as newspaper stands both
for pre-paid cards and the Blesk tabloid. Since a brand reseller need not build
either its own network or infrastructure, this business model is least demanding
for capital expenditure. A brand reseller can approach even a small segment of
end users that are then consolidated into clusters with certain specific
characteristics such as operating on the same premises or having similar or very
similar needs. As an example, he may set an offer of special tariffs for students.
Brand resellers are only restrained in capability to innovate their own services to
those provided by the infrastructure operator. The space for price adjustment is
limited (Špaček and Štěpán, 2013).
The service operator ranks between the brand reseller and full MVNO. This
model offers more flexibility than the brand reseller model, especially in terms of
managing customer relationships, pricing strategy, and amount and structure of

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the services offered. Service operator models are, from a technical point of view,
more complicated, because service operators operate their own IT system.
Compatibility of both IT systems is an underlying factor for optimum
collaboration with a MNO.
Due to the interconnection of both IT systems there is an increased dependence
by a service operator on its host MNO. The service operator model enables price
competition with the host MNO since the service operator is allowed to actively
manage customer relationships (CRM) as well as influence price strategy. In this
way a competition between the virtual and host operator may come into effect,
especially in segments with high profit margins (premium segment).
The MNO often regards service operators as competitors and is sometimes not
willing to lease infrastructure to them. A possible solution to this problem is
either signing an agreement, where the host reserves conditions which are
favourable to him or taking only market positions that create synergic effects.
The full MVNO (Mobile Virtual Network Operator) includes ownership and
operation of the complete infrastructure except its Business Support system
(BSS). A full MVNO issues its own SIM card with unique IMSI identification
and a specific phone number with its own dialling code. Call termination fees2
are charged as a liability of the full MVNO. The full MVNO hires the base
stations system only.
As opposed to previous types of virtual operators, the advantages of full MVNO
consist in the interconnection of calls, better flexibility with respect to the MNO
and innovation opportunities. A full MVNO, as distinguished from service
operators and brand resellers, is relatively independent of the host. If the full
MVNO decides to change the host MNO, there is neither a need to change end
user SIM cards nor to change the settings of the IT solution. A full MVNO can
also offer all the services a MNO does. The only limiting element is the quality
of the host MNO network (2G, 3G or 4G system). When a higher quality BSS is
desired then it becomes necessary to change the host. In general, the larger part
of its own infrastructure the operator controls the higher possibilities for virtual
operators to exist (Špaček and Štěpán, 2013).
The MVNE (Mobile Virtual Network Enabler) model differs significantly from
the aforementioned models. This type of virtual operator has no direct contact
with the end user. Its core business resides in services mediation to other virtual
operators. As a matter of practice, MVNE uses the system of base stations (BTS
and BSC systems) of the MNO operator. Additional systems like NSS (Network
System Security) and OSS (operational support system) are in possession of
MVNE. Applicants who want to operate MVNO can use the structure that
MVNE already owns and leases. MVNE then arranges for client access to other
networks, establishes a virtual switchboard and connects the call with that person
to be called.
2
It means rates which mobile operators charge to each other.

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A typical example of MVNE in the Czech Republic is the Telematika Company

which collaborates with O2 and thus it achieves complete Czech Republic region
coverage.

4.3 Criteria of Mobile Virtual Network Operator (MNVO) choices

First of all, one must choose an appropriate type of MVNO. This represents a
complex multi-criteria decision making process. When choosing a proper set of
criteria it is inevitable to observe all those aspects that contribute to competitive
advantage as well as those that represent key risk factors.
First of all, the time factor is worth mentioning, since current market demand for
cheaper operators will be continuously compensated for an increasing number of
new virtual operators entering the telecommunication market. Another risk factor
that may hamper successful MVNO establishment is initial investment costs.
Providing that the project didn’t work out, it would be difficult to sell partially
worn out technical equipment.
But ownership results in the increase of profit margins, which accounts for
another possibility. As a matter of fact, the establishment of MVNO would
always be backed by a feasible legislative process which may vary by the model
chosen. At the end, a company needs effective process management to be
purposefully established. The number of employees, organizational structure and
other aspects of company management are crucial to company success. The skills
of company management should thus be considered as a criterion.

5 PROPOSAL OF A NORMATIVE BUSINESS MODEL

INNOVATION AIMED AT ESTABLISHING A VIRTUAL
OPERATOR3
Even if the approach to establishing a virtual operator may differ slightly from
case to case, it is possible to generalize findings from the current practice of
existing and potential virtual operators. Thus a set of recommendable steps for a
normative business model innovation draft can be made to establish a
competitive virtual operator. This model has been further refined. The setting up
consists of the following steps.

5.1 Macro and microeconomic analysis

The analysis performed by the authors proved the priority of information, which
is necessary for managerial decision about further development of the virtual
operator establishment project. Ascertained opportunities and threats are the risk

3
The chapter comes out of the normative model addressed by Špaček and Štěpán (2013) which was
broadened, refined and tested in the sense of research questions set forth in this text.

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factors which are analysed whether an environment is suitable for the

establishment of a virtual operator.

5.2 Internal company analysis

Analysis of internal company´s environment confirms strengths and weaknesses,
that determine the unique assets or competences a company has and whether it is
possible to offer them to a Mobile Network Operator (MNO) in partnership. Such
an approach identifies potential synergic effects from which both companies will
benefit. The outcome of this analysis is always a set of tangible or intangible
assets which may be the source of competitive advantage.

5.3 Strategic goals determination

Strategic goals are determined in agreement with the well-known SMARTER
principle (Fotr, et al., 2012). Long-term strategic goals at the corporate level
should be reduced to partial goals tied to individual processes. For the effective
implementation a set of short-term goals must be derived from long-term goals.
The implementation process can be supported by special methodology, such as
Balanced Scorecard.

5.4 Process organizational structure determination

The main goal of the process organizational structure determination is to find
such process architecture, where each process contributes to company value
creation. Key company processes are marketing, new customer recruitment,
service delivery and customer support. Each of these processes is assigned a
process ‘owner’ responsible for complete management including goal settings,
incorporation of permanent improvement principles and sources allocation. The
outcome is a proposal of company process structure to be visualized by a
company process map.

5.5 Elaboration of a marketing plan

The important aspect of a marketing plan is market segmentation. It is evident
that a Mobile Virtual Network Operator (MVNO) most effectively operates when
customers are satisfied within particular segments. Research done in the Czech
Republic ascertained that there are dissatisfied customer segments in the Czech
telecommunication market (Špaček and Štěpán, 2013). The marketing plan is
based on the ‘4P principle’ (product, price, placement, promotion). That is
extended by an additional ‘3P’ in the service sector (people, processes, physical
evidence). 4P is then collated with 4C one (customer value, customer costs,
communication, convenience) so that the customers´ standpoint is properly
reflected.

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5.6 Choice of Mobile Virtual Network Operator (MVNO) type

according to criteria
The process of choosing an MVNO type is subject to meeting already specified
criteria, the objective being to find a model that best fits predefined criteria. The
set of predefined criteria posted in this paper arose from the research and mirrors
the most important operator preferences. They may still adapt to fit a particular
situation. Criteria evaluation process adheres to the commonplace principles of
managerial decision making (Fotr, 2006).

5.7 Corporate strategy elaboration

Investors shall make investment decisions that confirm the economic
effectiveness of the project as well as financial decisions based on the financial
viability of the project. This means an investor must be assured that for each year
of the project he will receive such a combination. The point which must remain
in focus is human resources management.
The corporate strategy reflects customer preferences, market and segment
situation and competitors activities. Based on key company competences the
strategy have to preserve flexibility simultaneously with focus on low cost
competitiveness.

5.8 Critical success factors (CSF) determination

While discussing virtual operator expertise, the following four critical success
factors were determined: (1) negotiation with Mobile Network Operator (MNO)
and coming to terms, (2) reliable function of a network, (3) web application
quality, and (4) cost overruns, shortage of cash flow.
Negotiation with MNO
Suggestive and persuasive presentation of the proposal to the MNO is a keystone
of project success. Composition of a team to be in charge of negotiation must be
both representative (CEO and Corporate Heads) and professionally highly
qualified (telecommunication experts). The project must be clearly defined and
its layout must be at highly illustrative and understandable. The synergic effects
and benefits for both parties must be effectively highlighted. The concept must
properly address the type of Mobile Virtual Network Operator (MVNO), as well
as outcomes of previous analyses, technical solutions to the project, tangible and
intangible assets to be invested, securing financial sources, proving economic
effectiveness and commercial viability supported by guarantees to investors.
Remember thorough risk analysis and the set of provisions for their mitigation.
On the other side the MNO must indicate if the proposal is worth further
discussion. Both parties should play win-win game. If the project seems
profitable for both parties it is inevitable to proceed with negotiation on further
agreement. It is tedious work and both party lawyers must play their roles.

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Notification to Czech Telecommunication

Depending on the model chosen some obligations to the MNO may occur. The
scope and nature of these obligations should be properly addressed in PESTEL
analysis. This basically deals with the compliance with the Law No. 127/2005,
which sets up conditions for communication activities execution. This legal norm
is applicable to all sorts of networks and electronic communication services.

6 DISCUSSION AND FINDINGS

Business model innovation is considered one of the vehicles that drive
prosperity. Operating a functional Business model is widely understood to be
superior to having a good and technically perfect product. Considering the
establishment of a new business model is relevant in situations where obsolete
business models no longer reflect customer needs.
Such a situation came into existence over the past several years where the
oligopoly telecommunication market was unable to satisfy customer needs in
terms of providing high quality service at affordable prices. For this reason
Czech government enabled a relaxation of the Czech telecommunication market
to enable so called ‘virtual operators’ to enter the Czech telecommunication
market.
Mobile Virtual Network Operator offers a new business model that brings added
value to both providers and end-users. This business model is spreading across
the world and includes more approaches to operation, strategy and technical
solution. The launch of virtual operators is supposed to come into existence in
the Czech Republic in near future.
Even the first ‘early bird’ BLESKmobil has already noticed. The virtual operator
business model brings new benefits like lower demands for capital expenditure.
Prior to formulation of a normative model, thorough analyses of macro and micro
environments were performed so that the suitability of the Czech
telecommunication market for a new virtual operator establishment would be
properly judged. As measured by the Herfindahl–Hirschman Index (HHI) it was
found that Czech telecommunication market had an oligopoly character. The
three existing rivals don’t exert sufficient competitive pressure which would
level prices to the European market.
The normative model presented in this paper was built up step by step based on
fundamental information from internal and external environment. Then process
organizational structure was defined, goals were determined, marketing plan was
formulated. After that it was posible to set criteria for the Mobile Virtual
Network Operator (MVNO) type negotiation. Finally corporate strategy was
confirmed and critical success factors were set.
The key finding was that, notwithstanding reinforcing competitive pressure
caused by newcomers, the Czech telecommunication market is still very

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promising and profitable for newcomers (see Tab. 1). The paper sought answers
to three research questions. The answers follow: (1) the presented business model
is feasible in the environment of the virtual mobile operator. This finding was
approved by the managers and specialists of the virtual mobile operator
BLESKmobile after having tested the model on selected data. (2) Partial
procedural steps of the model were presented in the paper (see Chapter 5).
The requirements for the procedural steps were derived from both the literature
reviews and contextual interview with virtual mobile operator managers and
specialists. These requirements include corporate strategy, macro and micro
environment analysis, thorough internal company analysis including core
competences, resources review and company intangible assessment such as
human capital, organization and information base. Specific regulatory
requirements must be taken into account as well.
Based on this requirement the critical success factors of the implementation of
mobile virtual operator were determined (see Chapter 5.8). (3) Formulated
procedural steps are valid because data exists for each proposed procedure. The
model is complex and flexible because it is possible to make corrections in real
time upon the finding of fundamental changes in the environment. It reflects the
actual strategy of mobile operators and that´s why it can be taken as relevant for
the establishment for the new virtual mobile operators.

7 CONCLUSION
The paper deals with the determination of business innovation model possibilities
by creating sustainable competitive advantage in the branch of contemporary
information and communication technologies. The business model innovation
design is always closely connected with the business strategy of the firm.
Some authors like Porter are convinced that firm´s strategy is on a higher level
than business model innovation and it represents the only way to achieve
superior profitability of the firm. As to be directed into future, both strategy and
business model innovation must mitigate a number of risks. But on the other side,
risk factors may also present an opportunity for starting new businesses and
safeguarding them by competitive advantage. From this point of view firm´s
strategy and business innovation model must be in consonance.
The success rate of created business model innovation can be multiplied by
rationally set regulation criteria, which in the long-term leads to sustainability of
the system. The business model innovation is specific for each branch and
company and underlies actual changes in the environment.
This paper presents the structured normative model of virtual operator foundation
which hasn´t yet been solved and would be almost generally applicable by any
potential newcomer to the budding virtual telecommunication market. The
research verified feasibility of this model that responds to the demand of virtual
telecommunication operators. The normative model was primarily designed on a

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84 QUALITY INNOVATION PROSPERITY / KVALITA INOVÁCIA PROSPERITA 20/2 – 2016

theoretical base that was confirmed by the opinions of virtual mobile operator
managers and specialists. Further validation of this model in practice is the future
challenge for the applied research.

ACKNOWLEDGMENTS
This paper was elaborated with the subsidy of IGA2 304015 at University of
Economics in Prague.

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ABOUT THE AUTHORS

Doc. Ing. Miroslav Špaček, Ph.D., MBA is an Associate

Professor in the Department of Entrepreneurship, Faculty of
Business Administration at the University of Economics in
Prague, Czech Republic. His scientific work is oriented toward
post-implementation appraisals of investment projects as well
as on innovation management. In the past he held top
managerial positions in both chemical and pharmaceutical
companies. Tel. +420602477517, miroslav.spacek@vse.cz
Doc. Ing. Emil Vacík, Ph.D. is an Associate professor in the
Department of Strategy, Faculty of Business Administration at
the University of Economics in Prague, Czech Republic His
scientific work is oriented toward various aspects of company
strategic planning, risk management and company performance
measurement. In the past he held various top managerial
positions in industrial companies. University of Economics,
Prague, W. Churchill Square 4, 130 67 Prague 3, Czech
Republic, emil.vacik@vse.cz

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