MVNOs compete in a fast-changing world

Being a successful MVNO is not easy--margins are especially slim, competition is fierce and larger players, be they a new entrant or some multinational supermarket, can trample the carefully constructed plans of an MVNO in seconds.

Those that have worked within the MVNO sector talk avidly about segmentation, segmentation and more segmentation. It would seem that the thinner they can slice an already small segment of the market the more likely the MVNO is to survive and turn a profit.

This is best characterised by the ethnic market where a few MVNOs, such as Lycamobile, and have become hugely successful and taken their business models into other countries. But I wonder how these largely SIM-only MVNOs will migrate their customers to something more, such as smartphones.

They are not naturally the best mobile providers to help SIM-only users make the somewhat delicate transition to smartphones and advise on what might be the best data plan.

At this stage, the MVNO customer might want to reconsider the merit of staying with their MVNO, regardless of the ethnic support and low-cost calls they receive, or switch to a mainline operator--and still benefit from low-cost pricing.

This worry seems to be recognised, and more MVNOs are now looking to specialise on other segments where they leverage certain skills. These include the SME, M2M and logistics sectors where the MVNOs can apply their knowledge without the need for high capital expenditures.

One mobile virtual network enabler (MVNE) claims he can successfully bring a specialist MVNO to market with as little as 1,500 customers, the key being high-quality and specific market knowledge and not low-cost voice services. An indication of this shift came from a senior operator executive, who said the company wasn't interested in hosting MVNOs with a low-cost ethnic market strategy. "That's a fools' game now," was the stark assessment.

What does seem to hold potential for MVNOs is the world of mobile data--not providing the lowest-cost service, but adding value with perhaps M2M applications and technology. Data is an exceptionally fast-growing market and undergoing rapid change. For MVNOs interested in their future well being, perhaps a glance in this direction would be timely.

For more on the changes happening within the MVNO sector, check out this special report on the topic.--Paul