MVNO World Congress report: why MVNOs are like fruit flies

Written by on May 31, 2017 in Guest Blog with 0 Comments

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The MVNO World Congress is something of a MWC for the virtual operator business, a place for MVNOs to meet, greet and pick up on new trends. Held in April, in Nice’s gloomy Acropolis two weeks before the arrival of the TM Forum battalions, it’s small and, if not quite perfectly formed, certainly vibrant and lively.

The phrase that will stick in my mind from the pre-conference workshops is ‘MVNOs are like fruit flies’, which I think came from Cartesian. Not that I consider myself any kind of an expert in evolutionary biology, but I think the general point was that fruit flies make a great subject for study because they breed fast and are forever taking new and fascinating evolutionary paths.

If the brief lifespan of the average fruit-fly, and the relative shortness of most of those evolutionary byways was also the point, then those similarities were left diplomatically unstated – but we’ll come back to them.

If nothing else, it’s an apt metaphor for the rich variety of the MVNO market.

MVNOs – virtual operators – get created for all kinds of reasons. You’re a retailer that wants to extend your brand and create a new customer channel? Set up an MVNO! You’re an operator that wants to exploit brand recognition in new territories without going to all the trouble of building a new network? Start an MVNO! Or maybe you’re just spotted a gap in the market or a neglected demographic – young people… old people! Music fans! The unbanked… expatriates… Maybe you’ve seen an opportunity to use new technology as a springboard for your proposition as Republic Wireless and Freedom Pop have with WiFi in the US. If so, an MVNO is the way forward for you.

The MVNO market is nothing if not a broad church and at times it seems there’s room for anyone that wants to explore the telecoms market’s neglected nooks and crannies or steal a march on slow-moving incumbent operators.

But lifespan and sustainability can’t be ignored in a space as volatile and competitive as the secondary telecoms market, and given that the lifespan of an MVNO is likely to closely parallel the value of its customers, it got me thinking about our old friend Customer Lifetime Value – and how vital a tight focus is on the elements which contribute to it. In particular:

  • What it costs to take on and support a new customer. Acquisition and support require responsive customer service, and processes such as onboarding and activation need to be fast and easy. Speed and accuracy call for a high degree of automation, which points to digitalisation of the customer interface and wherever possible, customer self-service. The good news is that not only does this all benefit the MVNO, but customers tend to like it too, their enthusiasm for long waits in call-centre queues having somewhat waned.
  • The revenue that can be earned from a customer – and how profitable that revenue can be. MVNO World Congress was full of ideas for maximising share of wallet. Financial services continue to be a vital revenue add, particularly in the developing world and among unbanked demographics elsewhere, and nothing ties the customer in like looking after their money. Multi-play is steadily pushing beyond quad and into utilities and energy. And in small business markets, always a Cinderella demographic for operators, successful MVNOs like Ainacom in Finland points to the importance of a comprehensive offering that runs all the way from unified comms to ICT equipment to consulting – a one-stop service for the small business that understands the customer’s particular requirements, leaves no available revenue on the table, and closes off the entry points for competitors.
  • How long the customer can be retained and a profitable revenue flow sustained. In most cases this comes down to the customer experience. Is the proposition well-targeted and competitive? Is it easy for the customer to change their bundle? Is pricing transparent? Are the brand values attractive?

Customer Lifetime Value (CLV) is far from new, but it tends to have a sharper focus in the MVNO market, where a high percentage of customers prefer pre-paid and SIM-only deals, and where margins are tight (and, in Europe, about to get even tighter with the advent of roaming changes).

The upside is that new approaches to MVNO support are mitigating much of this struggle. The move to cloud-based IT and core network, and to managed services for many business functions means that risk-reward calculations can be much more transparent – the cost per month to support a subscriber can be directly balanced against the cost to acquire him, and the revenue and profit margins from services and products. Open IT platforms and core networks make it easier to work with partners and third party suppliers and to introduce new services like banking, media or utilities into the mix.  Digital transformation – or better yet, a natively digital business – means that interaction between the customer and the MVNO can be smarter, with easy access to billing and other data for the customer, an open channel for communications and promotions for the MVNO and big data-driven analytics that will help the MVNO drive a better proposition to the market and to individual customers.

So are MVNOs like fruit-flies? In terms of the constant evolution and change which their often harsh ecosystems demand, yes, most certainly, and long may that continue, not least for the welcome innovation that it brings to the telco business. In terms of sustainability? The good news is that new technology and new business models are opening up bright futures and the possibility of long and rewarding lives – even for the industry’s fruit flies.

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Robert Machin

About the Author

About the Author: Robert has worked in the telecommunications industry for more years than he cares to remember and is a regular contributor to industry forums, conferences and publications, most commonly on the impact of new technologies on billing, charging and the customer experience. He is currently helping Openet to develop its proposition to the wholesale and virtual operator market. .

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