I'm of the belief these days that the success of some of the high-flying MVNOs like Helio, Mobile ESPN and Amp'd will depend on how patient their investors or parent companies are in letting these companies lose money as they experiment and tweak offerings before they find the right formula for attracting customers.
Earthlink revealed last week that its MVNO joint venture with SK Telecom and Helio cost it $13.3 million in losses last quarter, and the company expects its proportionate share of Helio's losses to be between $75 million and $85 million in all of 2006. Both SK Telecom and Earthlink committed $440 million to fund Helio, which recently began expanding its distribution and marketing efforts.
We also saw analysts at Merrill Lynch call for Disney to pull the pug on MVNO Mobile ESPN, estimating that Mobile ESPN will attract 30,000 subscribers over the course of its financial year, well below the original estimate of 240,000. Along with the losses generated by a second Disney-branded phone service, the firm expects Disney will lose $135 million on its experiment in fiscal year 2006.
Meanwhile, Amp'd Mobile, whose war chest recently reached more than $250 million with investments from entities such as Intel and Qualcomm, launched nationwide services in December. An in-house video studio and $250,000 recording and broadcast trucks are two examples of Amp'd Mobile's unique, and what some say extravagant approach to content.
All three MVNOs have naturally tweaked their service offerings as they discover what the market wants. Helio included a lower-cost, all-inclusive entry pricing plan for $65 a month, new a-la-carte options and the ability to add another line to the account for $10. Mobile ESPN's changes have been more dramatic with a change in marketing and pricing strategy as the company realized it can't rely on its stellar ESPN brand alone to attract customers. Amp'd has also changed and added offerings, including prepaid options.
But it's pretty likely that all three of these companies won't reach the subscriber or revenue expectations their backers have placed on them. Will their backers pull the plug or revise their expectations? Of course, no company can afford to pump money into a money-losing proposition for too long. Earthlink, for instance, is suffering right now from falling revenues from its dial-up business and its heavy investments in municipal WiFi, which it hopes will begin to pay off. SK Telecom also has pressures in its highly competitive home market of South Korea. Disney has already invested in another MVNO. Will patience pay off? - Lynnette