I’m sure what you are about to read will annoy some people, but I had almost forgotten about mobile virtual network operators (MVNOs) and their place in the telco food chain. Big mistake!
I now know that just because I am not exposed to any MVNOs where I live, or that they rarely make the headlines, does not mean that the MVNO market is not surviving. In fact, it’s quite the opposite.
When I was invited to chair a session at the recent MVNOs Asia event in Singapore, I was concerned that I would be hearing the same old stuff I had been exposed to over the last ten years, when stories of woe from failed attempts and how to avoid the pitfalls were common. Equally prevalent were stories of MNO disinterest, uncompetitive wholesale rates and regulators that were keen to have MVNOs active in their markets but did little to support or promote their cause.
MVNOs in Asia seemed to be living in the ‘twilight zone’ – either trying to exist on the dregs overlooked by the established MNOs, or growing as quickly as possible, at whatever cost, aiming to be acquired. In some cases, they were simply so annoying that the MNO host would buy them just to take back the subscriber base lost to them.
But wow, have things changed! MVNOs are making great inroads not only by establishing themselves as viable businesses, but also capturing substantial market share – with, in some cases, the support of their hosts. There are still attempts by big brand names to launch MVNOs as a brand extension and an extra service, but today’s players are a lot more serious – and much better funded.
It seems the most successful MVNOs are those that target specific market sectors and avoid taking a one-size-fits-all approach. Targeting specific socioeconomic or demographic groups means lower marketing costs and the greater possibility of going viral.
Digitally-aware MVNOs have no brick-and-mortar outlets, relying on self-care applications, chat bots and very simple tariffs heavily oriented to data only usage. This means much lower administrative and back-office costs, a scourge for legacy players.
Many of their suppliers – from sales and customer care to billing, fraud management and revenue assurance – are cloud-based SaaS operations working on a pay-as-you-go basis, leaving valuable capital to be spent on marketing and customer acquisition.
Today’s MVNOs are ‘lean and mean’ and seemingly better adapted to making reasonable profits from slim margins. They are quick to target new market sectors unburdened by the legacy OSS and BSS systems of their hosts, and they are more likely to become viral in the community or common interest groups they design specific offers for.
There’s another area that is also gaining momentum – MNOs establishing themselves as MVNOs in international markets. They choose markets where a large percentage of their customers visit (with the aim of protecting roaming revenues) and markets that have large migrant communities that might prefer dealing with the same language and customs they’re accustomed to. China Mobile is an excellent example of a Tier 1 MNO establishing MVNOs in key overseas markets.
In some cases, if MVNOs gain enough traction, they may be bid for spectrum and become a full MNO in their own right. This equates to ‘testing the water’ without the massive exposure of acquiring spectrum in an untested market. Clever stuff indeed.
Another scenario is where an MNO establishes an MVNO in its own market to capture a segment it is not addressing via its core brand. Setting up as a hip and trendy sub-brand with a digital portal and zappy name may be just the things to capture the millennials they are missing as a plain old telephone company. This also gives the MNO the opportunity to test new technologies in a greenfield setup without the burden of a legacy system in their core operation.
Whichever way you look at it, the MVNO scene has changed dramatically and continues to change. It’s not quite the tail wagging the dog, but the level of innovation and creativity being seen may well have a major impact on the way MNOs do business in future. Watch this space.