Analyst: Operators should move now to cash in on MVNOs

Vodafone's latest MVNO deal with UK supermarket chain Sainsbury's means that three of the UK's largest supermarkets will in future offer mobile services based on an MVNO model. In the view of one analyst, more mobile network operators across Europe and elsewhere should be cashing in on wholesale services, where margins can be as much as 50 per cent.

"The mobile virtual network operator business is hugely profitable for mobile operators," wrote Informa Telecoms & Media analyst Dario Talmesio. In the UK, for example, "operators' margins for their MVNO business exceed 50 per cent, while their own retail operations barely reach 25 per cent."

Leading MVNOs in the UK, where operators have tended to embrace the MVNO model, include Tesco Mobile and Virgin Mobile, and Mobile by Sainsbury's is set to start later in the summer.

Although regulation still needs to change in some European markets to allow the entry of MVNOs, Talmesio wrote that he believes consumers are now ready to buy mobile services from retailers, postal services and other brands looking for new ways to generate revenue. Network operators should be embracing rather than obstructing the sector, he said.

Informa calculates that in the UK, private-label mobile offerings account for about 14 per cent of the total mobile telephony market, and said their subscription counts are growing at a much faster pace than those of branded network providers, such as Telefónica's
O2 and Vodafone.

Informa estimates that MVNOs in the UK alone bring in £900 million to £950 million ($1.37 billion to $1.45 billion) in annual revenue for mobile operators, with profits of £400 million to £500 million.

On a global basis there are now 120 million MVNO subscriptions, which is just 1.8 per cent of the total mobile subscriptions. Informa forecasts that there will be 311 million (3.5 per cent of the global total) by the end of 2017.

 Operators can't ignore the trend," Talmesio wrote. "However, it is important to remember that serving the MVNO sector as a network operator means working with firms that are inexperienced in mobile. If you want to supply wholesale network equipment to a retailer, you need to give the retailer much more than just access to a network. Retailers are good at selling, not mastering technologies."

For more:
- see this Informa blog post
- see this Bloomberg article

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