News From Telecom World

The death of the MVNO

Posted on: October 22, 2008

As the industry’s focus moves beyond the SIM and data bundle, into value-added services, the future of the MVNO looks bleak.

The mobile telecoms industry continues to evolve, grow, and diversify, but not necessarily as many people would have expected.

Today there are very few true mobile network operators (MNOs) left. Quietly and almost un-noticed the traditional mobile-only operator has died, as most MNOs now offer fixed-line and other services, delivering a triple or quadruple play.

Take mobile virtual network operators (MVNOs) as another example. A few years ago MVNOs provided access to niche markets for MNOs, and a source of income for a whole new category of solution providers called mobile virtual network enablers (MVNEs). They were also considered by many to be able to make super-profits, since their customers would pay more for their branded and tailored service. The thinking was that as the major MNOs catered for the mass market, the innovative and more nimble MVNOs would develop tailored services for their very targeted sectors outside the mass majority and make a tidy profit.

Local MVNOs sprang up all over Europe and many have flourished. A few focussed on providing data-only services, over GPRS and 3G, with business models based on reseller agreements with MNOs. Make a commitment to a carrier to buy lots of data SIMs and then resell them to lots of customers.

Fast forward to a world with saturated voice markets, increased competition and regulation, and MNOs are now turning to wireless data as a source of revenue to help meet their EBITDA targets. Market conditions have driven down prices, and data is following voice down the commoditised road.

Where can mobile network operators find additional revenue? Simple, by broadening the network offerings, entering new markets and providing more services. Just the space MVNOs occupy.

The MVNOs are therefore facing more and more competition from MNOs and are now looking down a road with a bright light at the end of it. Their business is based on SIMs and living off the margin created by buying in bulk on a product that is being commoditised and is reducing in price, day by day. The MNOs are moving up the value chain, entering more markets directly, and in many cases adopting the one-stop shop model. The future of the data MVNOs is at best uncertain.

However there is always opportunity in a changing market. There is a new breed of innovator, a provider of wireless data networking where a managed network is sold with related services, rather than just network connectivity. This business model is flexible and fits in with a company’s existing infrastructure and focuses on meeting the challenges of deploying mobile enterprise solutions. As the industry develops beyond the technology-push phase into the software and services phase, the focus moves beyond the SIM and the associated data bundle and into value-added services.

Only those who can adapt and develop new services, are SIM independent and scalable on a global basis, will flourish in the new Mobile 2.0 world.

Paul Smith is CEO at Wyless.

Source: Total Telecom

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