MVNOs: A Viable Business Model, Yet Not All Will Survive, Says Analysys

Business Wire, Feb 12, 2007

BARCELONA, Spain -- The MVNO business model has been used since the mid-1990s and remains popular, with a surge in the number of MVNO launches in the past two years. However, there are now more than 200 MVNOs worldwide and not all will be successful, according to a new report, Strategies for MVNOs, published by Analysys, the global advisers on telecoms, IT and media (www.research.analysys.com) In addition, the future holds a number of challenges for existing and would-be MVNOs, with new technologies, such as VoIP over cellular networks, further reducing the prospect of high revenue margins in the mobile market, says Analysys.

"Until recently, most MVNOs were similar and offered no-frills services, often based on prepaid voice at prices undercutting the incumbents' offerings. A number of companies have made a success of this business model and there is still scope for it to be used efficiently in some markets, especially by organisations such as large retail groups with well-known brand names", says the report lead author Emma Buckland, speaking from 3GSM. "However, some new MVNOs have shunned the no-frills business model altogether and are concentrating on offering data and content services to niche markets. At the same time, fixed and cable operators are increasingly choosing to extend their service portfolios by using the MVNO model to enter the mobile market."

Key findings include:

* Mandatory network access, i.e. the obligation on mobile network operators to open their network to virtual players, is a key enabler of MVNO success, in particular for voice-focused MVNOs

* Except in regulated markets, MVNOs rarely enjoy a market share of more than 5% in terms of subscriber numbers, not least because very successful MVNOs often get bought by existing telecoms players

* For MVNOs that specialise in content provision, there are significant challenges to be faced, given that the demand for non-messaging data services (often the core of their offerings) remains unproven in most countries.

This new report looks at the main drivers of an MVNO's business model and examines which regulatory and market conditions are most favourable for its success. The report presents a number of company case studies and assesses the reasons for their successes and, in some cases, failures.

The report is available to purchase at http://research.analysys.com/store, priced at GBP1700 (approximately EUR2450) plus VAT. Alternatively, telephone 44 (0)1223 460600 or email research@analysys.com.

Analysys will be available for comment throughout 3GSM. Analysys will also be releasing the findings of its report entitled Fixed-Mobile Substitution in Western Europe: causes and effects.

Analysys provides strategy and management consultancy, information services and start-up support throughout the telecommunications, IT and media sector. The company has over 160 staff worldwide, and, as part of the Analysys Mason Group, has offices in Cambridge, Dublin, Edinburgh, London, Madrid, Manchester, Milan, Paris, Singapore and Washington DC.