Research Notes

Why should anyone want to become a full MVNO?

Virtual Mobile providers that wants higher sales price, need to move up the MVNO value chain.

It is no secret that no-frills MVNOs have changed the competition in the many European mobile markets. One reason for their entry has been lower entry barriers, a result of regulation and the technological development. Because of these low entry barriers a large number of discount mobile providers have appeared, and following the entry of no-frills MVNOs a competitive situation with a large price pressure. In a number of countries this has lead to consolidation, when MNO’s have purchased the most successful mobile providers. In this situation the value of the mobile supplier are partly determined by the following parameters.
·         Entry barrier
·         Level of difficulty in moving customers
As the market is changing to more focus on segmented mobile providers and branded resellers, it is interesting to see how these parameters are influenced, and how the sales value of the mobile providers are changing.
Entry barriers
The more complex infrastructure and technology a new mobile provider need to invest in to start, the more financial resources and industry specific competences they need to posses, which of course all act as entry barriers and hence keep the value of the mobile providers high. It is a no secret that an MVNO need to invest more than a service provider, who needs to invest more than a branded reseller. The interesting factor here is the emergence of MVNE’s, who reduce the entry barriers for new mobile providers even more. An MVNE functions as middle man between the MNO and the mobile provider without their own network. The MVNE handles all the technical aspects and other area’s which are better handled by the MVNE.
For the MNO’s, that actively are trying to attract mobile providers without their own network (these can be called MNE’s or Mobile Network Enablers) the low entry barriers are a double etched sword. The low entry barriers are helpful in lowering the barriers for new mobile providers, however the MNO’s get more control of the market as a MNE, and traffic in their networks can increase.
When the entry barriers are lowered, it influences the possible sales price of mobile providers without their own networks in a downwards direction, as it becomes easier to enter the market for new players.
Level of difficulty in moving customers
There are big differences in the complexity for the different mobile providers in changing between the different mobile networks, and hence also differences in if the different mobile providers have a real choice in changing supplier, when the supplier first have attached himself to one MNO.
Only an MVNO can easily change supplier of mobile capacity/network (that is stop cooperation with one MNO and sign a retail agreement with another MNO). It is far more difficult for service providers or branded resellers to change mobile supplier, when they first have engaged in cooperation with an MNO or MVNE. These types of mobile providers can be said to be locked to the MNO’s or MVNE’s systems. This influences the sales value of the mobile provider, as the costs of changing supplier is significantly higher for service providers and branded resellers than for MVNO’s.
Interestingly using an MVNE as middle man, the mobile providers is locked to the MVNE’s systems/platforms instead of to the MNO’s, which makes the MVNE an equal competitor to the MNO’s who are focusing on wholesale operations to mobile providers without networks. So service providers and branded resellers can become partially independent of the MNO’s network as the MVNO is.
As a new mobile provider, one must carefully evaluate which mobile provider type best fits in terms of investment and possible sales price, when you exit your mobile investment.
The more that is invested in the mobile venture, the higher autonomy the mobile provider achieves, at the same time the possibility to move their customers, puts them in a unique bargaining situation against the Network provider. 
At the time of sale, the higher investment increases the opportunity of a much higher return on their investment.
These and many more points are described and analyzed in our new report, How to get success in the second Generation MVNO Market, a 300+ pages report, that goes into detail with the changes taking place in the mobile market currently.

How to get success in the second Generation MVNO Market

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