With the MVNO market booming again, it’s time for companies to step up and reap the benefits of the MVNO model boom. A mobile virtual network operator (MVNO) is a wireless communications service provider that does not have its own network infrastructure, but leases portions of cellular spectrum from mobile network operators (MNOs). They buy network services in bulk at wholesale prices and then resell them under their own brand name at lower prices. The success of the MVNO model in European markets such as the UK, Germany, Denmark, the Netherlands and Austria has encouraged many non-telecom organizations such as banks, media companies, retail chains and supermarkets to enter the MVNO space and open up additional income opportunities. SberBank and supermarket chain Aldi and Éxito are examples that have successfully launched their MVNO operations without a telecom background.
If operated efficiently, an MVNO can open up new revenue streams, make huge profits, and build a loyal customer base. The opportunities in the MVNO space are endless. According to an analysis by Global Market Insights, the global MVNO market size is expected to exceed USD 85 billion by 2022, growing 9.6% between 2015 and 2022. North America and Europe are major hubs for MVNOs , but emerging markets like Asia-Pacific and the Middle East also promise big growth in terms of Average Revenue Per User (ARPU). The growing demand for data-driven plans will also fuel the growth of MVNOs globally. The availability of cost-effective and multifunctional devices is expected to positively drive the size of the MVNO market.
However, the risks involved in the MVNO market are severe and some newly launched MVNOs in the past were unable to address the challenges effectively and eventually shut down their MVNO services. This year saw the shutdown of MVNO operations of a UK-based virtual operator post office that barely turned a profit. Barely a year after launch, the company was unable to generate enough money to continue operations and decided to bid MVNO offerings goodbye. A number of challenges await an MVNO that are discussed in the following sections:
differentiation
In an attempt to attract new customers, the MVNO must be ready to offer unique propositions in the form of Value Added Services (VAS) or price differentiation. This could be by exploring a niche market segment that network operators have not previously touched, offering services that users have not seen or used before, or something entirely new that an established network player has not tried or could never venture into. Citing a successful implementation of it would be China Telecom, which aims to launch an MVNO in Australia targeting the Chinese population of the mainland country. A great service differentiation is what distinguishes a company from the competition.
Marketing and Distribution
An MVNO cannot be successful until it reaches potential customers. Being a small startup, an MVNO must adopt an effective and flexible marketing strategy to build awareness of their unique offerings and propositions that set them apart from others in the market. An effective marketing campaign is what compels users to opt for MVNOs and not for the major networks already operating in the telecom market. Also, switching between the MNO network and the MVNO network must be easy for a customer in order to provide a seamless experience.
Average revenue per user (ARPU)
The average revenue per user is one of the key factors that determines the success of the MVNO business. It is the measure of revenue generated by a customer per unit of time. It allows a telecom operator to track revenue streams and growth. It is a big challenge in emerging markets like Africa and Southeast Asia. The increase in the subscriber base and competitive prices have resulted in a decrease in ARPU. Telecom players thrive to keep the ARPU metric in positive numbers to keep the profits flowing. In case of negative ARPU, the decrease in earnings could also lead to the closure of MVNO operations as in the case of Post Office MVNO.
Price
Pricing is another major concern for MVNOs as they cannot afford to engage in a price war. To ensure long-term success, it is necessary to maintain a certain level of price stability. When trading with a mobile network operator, an MVNO can protect itself by linking wholesale prices to retail prices.
For an MVNO to be successful, it must successfully meet challenges and continue to offer value-added services and differentiated services to attract new customers. To streamline its operations and optimize its costs, an MVNO must be flexible enough to adopt effective MVNO solutions from third-party sources. Effective MVNO solutions help MVNOs generate more revenue, improve service delivery to better serve consumers, and deliver excellent customer experience for increased customer satisfaction and retention.