Blyk to pull back from MVNO model beyond UK?

The MVNO model has been a troubled one - briefly successful experiments with different approaches (low cost, no-frills in parts of Europe; brand-led media models in the US) have usually led to failure or the acquisition of the virtual operator by a big name. There are a few exceptions, usually those backed by major consumer brands like Virgin or the UK's Tesco, but these have been outweighed by the failures.

The latest variation on the MVNO market, the advertising funded system, is also showing signs of strain, with pioneer Blyk reported to be scaling back its efforts. Most attempts to offer customers free calls or texts in return for viewing adverts have come from established brands like Virgin Mobile USA (with its Sugar Mama scheme), but Blyk was set up by ex-Nokia executives  and a veteran marketeer to pursue this business from scratch.

It launched in the UK in September 2007, and achieved a high profile among 16-24 year olds, but only built up about 200,000 customers. This suggests the model may be proving too limited to support Blyk's ambitions and those of its backers, especially at a time of advertising downturn.

Although it raised an additional €40 million ($51 million) last November to support its planned expansion beyond the UK, CEO Pekka Ala-Pietilä said the economic crisis had forced the company to cut costs and "streamline" its organisation.

At that time, it announced a new marketing strategy based upon partnering with major operators and local media companies rather than running its own virtual network operation. It adapted the ad-supported proposition even in its original market, introducing a monthly credit of £15 to be used for text or calls.

Now it seems to be pursuing the partnership approach even more strongly, confirming that it has scrapped plans to open full MVNOs in the Netherlands and Belgium, where it has offices.

According to TeleGeography, the virtual operator is now referring to the UK business as a "proof of concept" more than a blueprint for all its territories. The most likely route forward is for Blyk to work with larger cellcos, perhaps to run an ad-supported strand of their business under their brands rather than Blyk's own.

Blyk would bring its contacts and expertise among advertising agencies while the partners would bring a readymade customer base and channels. Blyk had previously planned to expand to Benelux, Germany, Spain and selected Asian markets during 2009.

Rethink Wireless