Mobile Virtual Network Operator (MVNO)

Telecom operators are struggling in today’s market environment. Competition is fierce and the operators are struggling for retention and average revenue per user. Mobile Virtual Network Operators (MVNO) are the new players in the mobile communications market. With the coming in of MVNOs, the markets are becoming fiercer.

What is the concept of Mobile Virtual Network Operator (MVNO)?

A Mobile Virtual Network Operator (MVNO) is a mobile operator that does not own its own spectrum and usually does not have its own network infrastructure. Instead, MVNOs have business arrangements with traditional mobile operators to buy minutes of use (MOU) for sale to their own customers.

The concept behind having the MVNO is to allow companies to participate in the business of supplying mobile services without having to hold a full MNO licence. MVNOs can focus on services and application levels, providing a vast variety of products to users.

There are different types of MVNOs, with different degrees of sophistication when it comes to the equipment owned and the services provided. Overall the MVNOs are expected to become drivers of differentiation among operators, by providing tailored mobile services to identified target users.

Till date, MVNOs are mostly a European, GSM phenomenon. With many simple resellers in the United States gaining popularity, it is likely that the MVNO concept will catch on in the US and other parts of the world as well.

What are distinguishing characteristics of the MVNO?

We have heard about resellers of telecom services such as long distance, local exchange, and mobile network services. In contrast, MVNOs typically add value such as brand appeal, distribution channels etc. to the resale of mobile services.

Successful MVNOs are those who position their operations so that customers do not find any significant differences in service or network performance yet they offer some special affinity to their customers. Unlike simple resellers, who often have little or no brand recognition, MVNOs are typically well known, well positioned companies, with a good deal of marketing clout. For example, Virgin Atlantic Airlines is a MVNO in the UK that uses its market recognition to position itself for selling directly to its airline customers and others.

Successful MVNOs will also be those who have ample financial resources and sufficient agreements with existing operators to provide a good service coverage area. Additionally, well-diversified independent MVNOs can offer a product mix that incumbent mobile operators can not match. For example, grocery store MVNOs could offer a package of MOUs and groceries.

The MVNOs specialise not in infrastructure assets but in market assets and they rent capacity from existing operators and resell it to audiences whom they understand intimately. These new players specialise in customer knowledge and brand management, and we know that branding is for share of customer base, and companies with significant brand equity expand their relationship through a trust-based proposition, and add more and more services to the mix.

What customers really want is a personalised service: the best network for what they are doing at that moment, regardless of who owns the infrastructure.

Mobile operators can lease the excess capacities in their networks on a wholesale basis to Mobile Virtual Network Operators (MVNOs) who manage customer relationships and partner for everything else. Established, well-recognized companies are leading the MVNO market by extending their formidable brand equity into the mobile data arena, and they will play an increasing role in popularizing mobile data services among consumers.

What are the Operational Issues involved?

While MVNOs typically do not have their own infrastructure, some leading providers are actually deploying their own Mobile Switching Centers (MSC) and even Service Control Points (SCP) in some cases. Leading MVNOs deploy their own mobile IN infrastructure in order to facilitate the means to offer value-added services. In this way, MNVOs can treat incumbent infrastructure such as radio equipment as a commodity, while they offer their own advanced and differentiated services based on exploitation of their own intelligent network infrastructure. The goal of offering value-added services is to differentiate the product/service offering compared to the incumbent mobile operator, allowing for customer acquisition and preventing the MVNOs from competing on the basis of price alone.

MVNOs have full control over the SIM card, branding, marketing, billing, and customer care operations. While sometimes offering operational support systems (OSS) and business support systems (BSS) to support the MVNO, the incumbent mobile operators mostly keep their own OSS/BSS processes and procedures separate and distinct from those of the MVNO.

The selection of network infrastructure today will separate successful MVNOs in the future. Advanced network visibility and control are essential so that MVNOs can offer value-based services today that can set the tone for future billing models thus ensuring long-term profitability.

What are the Business Issues for operators?

The major benefit to traditional mobile operators cooperating with MVNOs is to broaden the customer base, which means selling additional MOUs at a zero cost of acquisition. It is likely that incumbent mobile operators will continue to embrace MVNOs as a means of deriving revenue to offset the enormous cost of building 3G networks.
As more MNVOs expand in the marketplace, they are likely to first target prepaid customers as a means of low cost market entry themselves.

Most regulating bodies are in favor of MVNOs as a means of encouraging competition, which would ultimately lead to greater choice and lower prices.

With the advent of the MVNOs, many incumbent mobile operators will evaluate the opportunity to offer supplementary MVNO services of their own. To do so, existing mobile operators will use their established branding, service knowledge, and supplier relationships to compete against independent MVNOs.