MVNOs are strange animals, relying on little more than their ability to develop and package a tariff that will appeal to a particular set of customers.
But the vagaries associated with the business has not stopped many of Europe's larger supermarkets from becoming major players, or stopped the likes of Turkcell--Turkey's largest mobile operator, from signing an MVNO deal with O2 Germany to provide entry into this potentially huge market.
Operators are keen to attract MVNOs, with Orange stating that it wanted to recruit 20 this year. The company has even promised to turn interested firms into an MVNO within 6 weeks using the support of Transtel, a mobile virtual network aggregator.
But new research from Strand Consult has warned those interested in becoming MVNOs that few can survive in what is already a highly competitive sector.
In markets where MVNOs have been operational for between four and six years, Strand believes three to four will have captured 60 to 80 per cent of the overall MVNO market. These dominant players typically fall into three categories: large retailers, ethnically targeted MVNOs and Web-based no frills market players focused on cut-price tariffs.
According to Strand, the most successful MVNOs do not attempt to target or attract the mass-market, which would bring them face-to-face against their host operator and others, but instead their success is always related to specific segments.
This sharp focus has provided them with minuscule acquisition costs, extremely loyal customers and rock-bottom churn rates. The results of this approach, especially for no frill MVNOs, are churn rates of around 1 per cent a month, which is more than acceptable compared to more traditional operators.
Of note, the Strand report claims that MVNOs focusing on value added services to differentiate themselves are most often the companies with the poorest results on the market.
But this might be about to change.
The MVNO market is now thought to be at a transition point that will see the SIM-only and low-cost markets being dominated by the big supermarkets, and, to survive, niche MVNOs will need to adjust their business models to add services of particular attraction to their existing or targeted customer base.
An example--perhaps too early to be hailed a success--is with the people-powered MVNO Giffgaff.
While initially labelled a gimmick, the company claims that its top ten users now spend on average over nine hours a day helping other users, while 40 per cent of users earn cashback rewards. Giffgaff's users are now providing answers to questions within three minutes on average a day, and because of this people ask the community instead of calling an agent 50 per cent of the time.
While this unusual (unique?) approach reduces Giffgaff's investment in call centres, it importantly builds customer care and strengthens the feeling of community.
Is this the way forward? It seems so for some MVNOs today, and perhaps is an indicator of where the opportunity for niche MVNOs could be for the future--albeit that it might appear strange today. - Paul