Thursday, 28 December 2006

MVNO for success or failure ?

MVNO stands for mobile virtual network operator.
Currently, according to some estimates, there are about 230 MVNOs in the world.
Some of them are success, but some of them are failure.

The main characteristics of such an operator are:
- does not own licences frequency spectrum ,
- resells wireless/mobile phone services ( phones, calls, ''stuff'') ,
- strong brand,
- utilisation of the network of other mobile operator ( owned by big corporate groups and major telecom players in the country )

Speaking about success, Virgin Mobile is considered success and speaking about failures , ESPN Mobile and easyMobile could be mentioned as a flop.

According to some research I read , successful MVNOs do these things:
- Distribution – shelf space and access to audience
- Churn/loyalty programs – new phones every xy months, goodies, minutes
- Technology aligment with ''host'' operator – roadmap to future compatible products

Other things successful MVNOs do:
- management gets ''wireless'' tech,
- target segment is wisely choosed,
- asset-light investment strategy,
- win-win contracts
- understand content and wireless economics
- they are different
- keep things simle

MVNOs are ventures with great focus. They are either ''discount'' or ''lifestyle'' operators.
Virgin Mobile is discount MVNO, and Helio and Amp d' Mobile are lifestyle MVNO.

When I first taught about MVNOs back when they were first grabbing headlines ( in 2005 ) , there was allways question poppping in my mind about motivations of major mobile operators to lease their networks .
They were competitors indeed, but it has logical calculation.

Main motivations for T-Mobile, Vodafone or Verizon Wireless are these three and explain everything:
- Segmentation-Driven Strategies –it can help them attack specific, targeted segments.
- Network Utilisation-Driven Strategies – it can help them create economies of scale for better network utilisation.
- Product-Driven Strategies – specialised service requirements and get to customer niches that mobile operators cannot get to.

MVNOs have operational cost much lower but must invest very wisely into marketing.
It's a myth that MVNOs appeal only to consumer segment. Wireless Maingate is a company that targets enterprise customers.

At the first glance and with little opservation of MVNOs web sites, there could be reached easy conclusion on how they present their offer to potential customers which is their modus operandi and purpose of existence ( better business model in the end ) :

- offer shiny/new/fresh/exciting branded phones ( better cool phones ) ,
- simple plans ( prepaid dominates, post-paid is by minute and tailored to usage ) ,
- cheap talk ( is cool ) ,
- added value that appeals to targeted demographics – music, social network, multimedia ( you, that's cool ) ,
- superior customer service and loyalty ( cool ! )
- granular distribution deals with shopping chains and local stores ( for kits and prepaid minutes)

It's not all that shiny for them, though. Profitability is hard to achive. Management must be smart and explore every opportunity, scale their business, maintain good partnership deals and retain creative marketing people and must make plans for evolution into possible new products and services ( sometimes it is paradox, but what gives ).

As of December 2006, in Croatia are operating two MVNOs: Tele2 which is using Vipnet infrastructure, and the other is Tomato , which is Vipnet's branded MVNO for simple wireless services.

But let's go back to business model. These MVNO sharks are fast to the market, know their customers and are highly focused, but most of them will have to evolve into something convergent and triple-play ( laugh ) – I meant data and messaging ( paradox ).
Yet, I am skeptical for much of this risky business and I will watch this space more closely over the upcoming years.

You know , I heard somewhere on the net Apple will try next year become MVNO ( US only ) which is not so smart move if he does try, IMHO.
Europeans won't give up their Nokias or Motorolas in favour of
Apple phone , I think.

( still to do outside linking later on )

1 comment:

Nick, London said...

Europeans won't give up their Nokia or Motorolas for Apple phone...

Haha bet you're not too proud of that 'prediction' are you...?