Who wants to be an MVNO? The evolution of the wholesale market

Written by on October 7, 2016 in Guest Blog with 0 Comments
Sunny Studio / Shutterstock.com

Sunny Studio / Shutterstock.com

MVNOs – Mobile Virtual Network Operators – have no physical networks, lease wireless capacity from existing mobile service providers and, though they resell services under their own brand name, are highly dependent on their enabling operator. On the face of it, not a strong position from which to build a successful telco business.

On the upside, they’re a retail business, free from the pressure to invest in primary technology and to find a return on that on huge investment. But they have other challenges.  To be successful they must differentiate themselves from some pretty powerful competition – not least, very often, from their own ‘foster-parent network’.

No easy task. In these days of low-cost services and all-you can-eat bundles, falling rates (and revenues), highly competitive markets in almost every geography, and regulators steadily ratcheting down on once-profitable areas of the mobile business, how do you differentiate? And where is the attraction in starting up any kind of mobile service business?

To say this, however, is to see mobile communications purely as a utility business, churning out a commodity product with steadily declining returns. But the mobile business is much more than that. For many organisations and enterprises, mobility is a key part of their digital strategy.  And for consumers and users, a mobile device is not only absolutely central to their lives, but a device whose potential (in commercial and technological terms) we have only begun to tap. Many enterprises would like a piece of this.

New players, new revenues

Few MVNOs enter the market aiming to turn a profit out of basic voice, messaging and data services. Primary operators – MNOs – already do a great job selling their own product, and where they see the opportunity to address a ‘price-sensitive’ market segment, they don’t do too badly with budget sub-brands such as O2’s giffgaff in the UK or Orange France’s Sosh.

But this doesn’t mean there isn’t new revenue out there.

In a saturated market, creating a competitive position is all about being visibly, tangibly different, and offering the customer a better customer experience – one that’s better aligned to their broad interests and their personal profile. And many successful organisations and enterprises are well positioned to provide this. MVNOs offer an opportunity for them to bring their success in other spaces – the high street, the news stand, the cinema – into telecoms.

screen-shot-2016-10-06-at-16-18-23Fact is, a phone is just a platform for delivering services. Hitherto they’ve been telecoms services, largely coming from telecoms companies, but a smartphone is also proving a great commercial platform for selling virtual or physical products and experiences, and for promoting brands which are unconnected with telco but which command their own loyalty. Here, telcos have no advantage over leading clothing brands, retailers, entertainers or entertainment companies, publishers, sports clubs and many other kinds of enterprises.

The branded MVNO, then, could make money through service revenues (particularly if the demographic it’s addressing is not especially price-sensitive). But it could also make money through value-added services and content associated with the brand. Or it could make money as a ‘loss-leader for the brand’ – making a small loss itself but relentlessly, through its persistent presence in the subscriber’s life, promoting and steering customers towards more profitable lines of business.

Once you start to look at the phone this way, the possibilities are endless:

  • A financial publication could add stock market and financial market information to the platform. It could wrap in premium financial analysis. It could notify hot tips and breaking news in real time. And it would appeal to a market that is not only NOT price-sensitive but which is also still loyal to the concept of conspicuous consumption.
  • High-end supermarkets – not just budget retailers – command brand loyalty and affinity that easily could be converted to an MVNO brand. Easy to see how the phone could become an integral part of their digital strategy, including daily offers, online ordering and delivery notifications and more.
  • Football clubs and entertainers can draw on a rich stock of content, and make much of it exclusive, free to their ‘brand community’ (while chargeable at premium price to non-subscribers). And could command fantastic loyalty from subscribers drawn to the idea of using a phone and services that make them visibly part of a community of interest – again, more promotion for the brand.

The overwhelming adoption of social media is a good example of our primal need as humans to connect to a herd.  Bringing mobility to already-established communities and to demographics with strong common interests makes logical sense as their identification with the group is likely to generate loyalty to the MVNO, and creates a self-defining target market for focused offers, entitlements and benefits. A successful example is the recent launch of Bayern Munich Mobile to a fan club base of 5 million.

So the potential value is clear and likely to be a key part of digital/mobile strategy for enterprises and ‘enterprising entities’. But, still, accountants will ask, will the game be worth the candle? Can enterprises really make the revenue – direct or indirect – that would justify risking capital on such an initiative?

Success is virtually assured

Once upon a time, when launching any kind of telco meant very high up-front investment in networks and software, such caution would have been well-advised. But now?

The good news is that for new MVNOs, very little capital investment needs to be risked. A good enabling partner – an MVNE – can take a prospective MVNO through the feasibility, design, and planning and launch process, can provide the business and operational support out of the cloud and can run the business on an invest-as-you-grow business. An experienced partner can even advise and negotiate with an appropriate network partner to get the business on the road.

So the business runs on an OPEX model – and even that cost need not be prohibitive. As in many other digital  businesses – and any new MVNO will be nothing if not a digital business –  functional virtualisation is replacing costly physical platforms, outsourcing and cloud-based solutions make costly investment in licenses and skills unnecessary, and the business becomes one that invests only as it grows, taking considerable risk out of the initiative.  The focus and effort of the business swings away from operation, much more towards innovation –  in branding, promotion, marketing, service creation and the customer experience.

So who’d be an MVNO? Well if your business engenders strong brand loyalty, in particular if it brings potential subscribers in serious numbers and with significant disposable income, then the question becomes ‘who wouldn’t?’  An MVNO offers a way to amplify, sustain and build on an already successful brand, and to put mobility at the heart of a future digital strategy. If that can also be achieved at very low risk – why wouldn’t you?

You can download Openet’s white paper, here.

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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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