Merlin Consulting
 
MVNOs - The Good, The Bad and The Ugly
MVNOs – The Good, The Bad and The Ugly
 
Despite the discount-mentality driving the vast majority
of MVNOs today, the MVNO retailing model promises to add value
to underserved segments, reduce churn and increase market share and ARPU!
 
We discuss which aspects of MVNOs make sense for which goals
 and how operators can become the preferred partners for thousands of MVNOs.
 

Executive Summary

 
A current trend in the mobile telephony industry is exploration of whether MVNOs is a solution to the problems of slowing growth, more demanding and unsatisfied customers, increasing churn and reduced margins.
 
Recently, some MNOs have adopted an open multi-MVNO retailing sales strategy, such as E-plus of Germany. Some non-telecom players with strong brands (such as Virgin) or strong presence in a segment ( e.g. Tesco, Disney) have launched their segment targeted MVNO ventures and become segment customised mobile telephony operators. Interestingly some of these virtual operators are scoring better customer satisfaction, greater loyalty and higher ARPU than their host network operators.
 
However in most cases the MVNOs are reselling at a discount the host operators service portfolio and adding little if any value to either the host or the end-customer. This may make sense to a host operator trying to win market share (provided the MVNO steals more customers from rivals than from the host), but for the industry it is a negative-sum game, and retaliation from rivals eventually means discount becomes the norm, and the whole industry suffers lower revenues.
 
There are success stories of business models from leading players in other major consumer oriented, but more mature, industries, such as Procter & Gamble (P&G), Dior, Sony and American Airlines that provide insight to unused target marketing and retailing sales opportunities for mobile telephony operators. However so far there is little experience with segment-targeted retailing in telecoms and segment-specific MVNOs.
 
Given all these changes, opportunities and uncertainties, we ask: Should MNOs adopt an open and proactive multi-MVNO retailing model?
 
MNOs should start now to identify, attract and maximise value from the right target segment customised MVNO retailers and business models that can boost net revenue more than the wholesale discount, reduce churn and generate wins for both host MNOs, segment customised MVNOs and end-users:
 
  1. Target-segment customised MVNO retailers have higher growth and customer satisfaction, increase revenues, reduce cost of sale and reduce churn.
  2. We distinguish seven grades of MVNO, and seven levels of segment-specific value-added they can bring, leading to at least 49 business models.
  3. MNOs should be prepared to be the preferred operator for thousands of potential partners that can apply these business models.
  4. Benefits to customers from segment customised MVNOs are so compelling, they might well want to belong to more than one MVNO.
  5. Six criteria to select the valuable target segments and partners to be segment customised MVNOs.
  6. Factors to get right to be the preferred MNO host for valuable segment customised MVNOs in a market and maximise value from end-users.

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