With the MVNO market booming again, it's time for companies to step up & gain benefits from the rise in the MVNO model. A Mobile Virtual Network Operator (MVNO) is a wireless communications service provider that does not have network infrastructure of its own but leases chunks of cellular spectrum from Mobile Network Operators (MNO).
They buy network services in bulk at wholesale rates & then resell the same under their own brand at lower rates. The success of MVNO model in European markets like UK, Germany, Denmark, Netherlands, & Austria has encouraged many non-telecom organizations like banks, media companies, retail chains & supermarkets to enter into MVNO space & open additional revenue opportunities. SberBank & supermarket chain Aldi & Exito are such examples who have successfully launched their MVNO operations being from a non-telecom background.
If operated efficiently, an MVNO can open up new streams of revenue, make great profits & create a loyal customer base. The opportunities in the MVNO space are endless. According to a Global Market Insights analysis, the global MVNO market size is expected to exceed USD 85 billion by 2022, growing at 9.6% from 2015 to 2022. North America & Europe are main hubs for MVNO but emerging markets like Asia-Pacific & Middle East also promise a great growth in terms of Average Revenue per User (ARPU). The increasing demand for data oriented plans is also going to fuel the growth of the MVNOs globally. Availability of cost-effective & multi-functional devices is expected to positively drive the MVNO market size.
However, the risks involved in the MVNO market are serious & some newly launched MVNOs in the past were unable to tackle the challenges effectively & eventually shut down their MVNO services. This year saw the closure of MVNO operations of a UK based virtual operator Post Office which hardly yielded any profits. With just a year after the launch, the company could not generate enough money to carry on its operations & decided to bid a farewell to the MVNO offerings. A number of challenges await before an MVNO which are discussed in the coming 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 had previously been untouched by the network operators, offering services that users have not seen or used before, or whole new thing which an established network player hadn't tried or could never risk it. Quoting a successful implementation of the same would be China Telecom, which aims to launch an MVNO in Australia targeting the Chinese population of the continent country. A great service differentiation is what stands a business apart from the competition.
Marketing & Distribution
An MVNO cannot succeed until it reaches out to the prospect customers. Being a small company in the initial phase, an MVNO must adopt an effective & flexible marketing strategy to create an awareness of their offerings & unique propositions which make them different from others in the market. An effective marketing campaign is what compels the users to go for MVNO and not for the major networks already operating in the telecom market space. Moreover, switching between MNO network to MVNO network must be easy for a customer in order to provide a seamless experience.
Average Revenue per User (ARPU)
Average Revenue per User is one of the key factors that determines the success of the MVNO business. It is the measure of the revenue generated by one customer per unit time. It allows a telecom operator to track revenue sources & growth. It's a high challenge in emerging markets like Africa & South-East Asia. Increasing subscriber base & competitive pricing has resulted in a decline in ARPU. Telecom players thrive to keep the ARPU metric in positive figures so as the profits keep flowing. In an event of negative ARPU, the decline in profits could also lead to shut down of the MVNO operations as in the case of Post Office MVNO.
Price
Pricing is another main concern for the MVNOs as they cannot afford to engage in a price war. To ensure a long-term success, some level of price stability is required to be maintained. When negotiating with a Mobile Network Operator an MVNO can protect themselves by having wholesale prices linked to retail prices.
For an MVNO to be successful, they need to successfully tackle the challenges & continue to offer value-added services & differentiated services to attract new customers. In order to streamline their operations & optimize their costs, an MVNO must be flexible enough to adopt effective MVNO Solutions from third party sources. Effective MVNO Solutions help MVNOs to generate more revenues, improve service delivery for serving consumers in a better way & provide excellent customer experience for a greater customer satisfaction & retention.
Tomas Jarvis is an experienced professional in the telecommunications industry. He is Product Expert at Telgoo5, a leading solutions provider to the telecom operators with clients all over the globe. He has written several articles related to mobile self care application, MVNO Solutions & knowledge management solutions.
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