MVNO: Virtual Reality

Amobile virtual network operator (MVNO) is a service provider that resells
wireless services under its own brand name but through another company's
network. This mobile operator does not have its own spectrum or even its own
network infrastructure. Instead it ties up with other service providers and buys
minutes of use (MOU) for sale to its own customers. According to Pyramid
research, MVNOs account for 2.75% of the world's mobile users and this figure
is expected to rise to 3.3% by 2010.

mvnodirectory.com states that there are around 213 active MVNOs in the world.
Although the majority of these are in Europe, USA is the country with the
largest number of MVNOs, with around 51 active operators.

With their number and popularity growing day-by-day, mobile operators cannot
ignore the impact that MVNOs are having on the market. Besides taking a large
market share, MVNOs are also increasing subscriber acquisition costs. Since they
focus on providing discounted voice services, they have also lowered the ARPU
and have thus increased the price competition.

How Does an MVNO Operate?

A key element in the operations of a MVNO is a mobile virtual network
enabler (MVNE). The MVNE is valuable to a MVNO since it
provides the infrastructure and services that enable MVNOs to provide
services to the end user. This support ranges from network element provisioning,
administration and operations to OSS/BSS support.

Thus, an MVNE often provides the “middle-ground” between MVNOs that want
control over network elements and those who do not. MVNE can help an MVNO to cut
costs and enable them to focus more on customers than on operations. MVNEs also
offer advanced wireless data services applications, content and commerce.

What Drives an MVNO?

The growth of MVNOs can be attributed to 3G developments which have led to
the availability of excess bandwidth. This has created opportunities for the new
players to enter the market. 3G enables them to sell discounted voice-and-data
services. This in turn allows host operators to generate additional revenue from
the use of unused bandwidth.

A number of telecom companies have woken up to the advantages MVNOs offer. In
May 2006, SK Telecom of Korea announced that it was launching MVNO services in
the US through the Helio joint-venture with EarthLink. Disney Mobile will launch
its services in the US in June 2006 and will be leasing a frequency spectrum
from Sprint (CDMA 1xEVDO). Disney MVNO will also target 'family
communication' as its niche demographic market. Mobile ESPN too launched its
MVNO in February 2006 in the US. Mobile ESPN will use Sprint's new EV-DO
network and offer customizable ESPN content such as real-time scores, breaking
news, commentary and analysis, etc.

The future of MVNOs appears to be stable as regulatory environments are also
in favor of MVNOs, especially in developed mobile markets. This increases the
necessity for mobile operators to develop a strong strategy to maximize profits
and minimize the threat from the new wave of MVNOs.

What's for Service Providers?

MVNOs are usually well-known companies who already have a strong customer
base. They operate in such a manner that the subscriber although does not find
much difference in the services and forms loyalty towards the brand. This leads
to reduced acquisition costs for service providers, combined with a large
customer base.

There are many other benefits that a MVNO can provide to a service provider.
MVNO can tap into its underutilized network areas to meet the demand of faster
data transfer. This will help to populate the network leading to revenue
generation. MVNOs also provide consumers with a larger range of schemes,
products and services, helping in customer retention and expansion of customer
base.

They can also drive collaborative growth among the MVNO, the service
provider, and other players such as content providers thereby facilitating
lucrative partnerships.

Besides the saturated voice market, operators are facing the problem of
optimum penetration levels. Here, MVNOs are proving to be favorable partners to
offer differentiated value-added services, which will help in tapping new
customers and driving incremental revenues.

MVNO: The Face of the Future

Analysts predict that despite there being a large number of entrants in the
MVNO market, only those who have unique strategies, defined processes and firm
partnerships will survive. Today, MVNO is fast becoming the most-popular telecom
acronym outside the industry. With a number of them already present in Europe
and America, the time is not far when they will become a reality in India too.

Sonia Sharma

sonias@cybermedia.co.in