Three characteristics of successful MVNO's in Europe

In Europe the number of MVNO's continues to grow. Today there are over 60 MVNO's in the UK and over 80 in Germany and there are still new launches on a monthly basis. The barrier to start an MVNO is very low, and many fail to establish a sustainable business model. Worldwide, only 20% of the conceived MVNO's survive. Owing to this relatively high rate of failure, in Europe, operators have become more cautious of investing to integrate new MVNO's and in some cases seek to off-set this risk through use of external enablers and aggregators. MVNO's seek more than ever strategies to grow and be successful.

BICS spoke with Ceri Tinine who works as a Manager at Analysys Mason in London. She worked on the launch of several new MVNO's in Western Europe. We asked her what sets today's winning MVNO's apart. Her experience with recent launches reveals some characteristics common to these winners.

First, the definition of business aims, focus, analysis, planning and commitment from management to make the MVNO work are fundamental. Especially big retailers have recently shown interest to grasp a few percentages of the telecom market share. As telecom is not in the core of their day-to-day business, it is important to assure that the economics of telecom are well understood and that the business plan is built up accordingly.

Secondly, the success of an MVNO is heavily dependent on choosing the right strategy to acquire sufficient subscribers. It's about what segment you want to reach and how to reach them. Online-only models were tested, but many people still prefer to go into a shop to buy a subscription. It's also about the means available to access the service offering. MVNO's offering data services have chosen to subsidise smart phones. This approach can lead to the build-up of substantial debt in the beginning for the acquisition of subscribers and lays already from the very start a heavy burden on the organisation. In the supermarket model, it is not by replacing wine by SIM cards on the shelf that this business will succeed. It requires understanding of the telecom offering and how to bring this to the market. All this to say, that the acquisition strategy must be well designed.

Third, winners assure solid partnerships with the host operator and other partners. Thoroughly considering what to do in-house and what to do through collaboration and partnering is definitely setting winners apart. The basic assumption that the host operator can do everything to make the MVNO succeed, is a wrong assumption. Host operators do not always have the necessary resources in place to support the MVNO. And the relationship between both is sometimes even highly competitive on the market. As a general rule, a host with a structurally separate wholesale division is a preferred partner (although notable exceptions apply). This, in addition to solid contracts and additional partnerships where appropriate, is a good approach to assure the success of the MVNO.