With the first few mobile virtual network operators out of the starting gate and more marching to the post, 2006 looks to be the year of the launch.
After 2005, during which several MVNOs spent gearing up for and touting their upcoming launches, the industry will get a chance to see whether MVNOs can run with the big dogs. Or if they have legs at all.
The list of launches set for this year includes Disney Mobile, Helio Inc. (expected to begin service this spring) and Mobile ESPN, which expects to kick off service Superbowl Sunday on Feb. 5. Amp’d Mobile Inc. soft-launched in late December and last week continued its ever-expanding offerings with a long list of cable and TV content partners. Voce, which seeks to cater to high-end wireless users by offering unlimited voice and data services and new handsets every four months (in return for a $1,500 fee to sign up and $500 monthly charges), is slated to launch in New York, Los Angeles and San Francisco by the end of the first quarter.
Mobile ESPN and Disney Mobile will launch on Sprint Nextel Corp.’s network. Verizon Wireless has taken Amp’d onto its network, and Voce will play on Cingular Wireless L.L.C.’s network.
MVNO enablers Global Advertising Strategies and MVNGO have estimated that that the global MVNO market will generate $4.9 billion in 2006, with the U.S. market eventually reaching 30 large carriers.
Yankee Group, by contrast, estimated that by 2010, there would be just six large players with more than a million subscribers each, five medium MVNOs with around 500,000 subscribers each, and about 25 small MVNOs with around 100,000 subscribers each.
“The first-tier MVNOs are already becoming established, with players like TracFone, Virgin and ESPN staking their claim in the market,” Yankee Group analyst Marina Amoroso said. “There is little room for new market entrants in the first-tier space, except for a consortium of cable subscribers and retail and brand MVNOs with national presence.”
Analyst Iain Gillott of iGillottResearch Inc. put it more bluntly in a recent newsletter.
“Not all of the MVNOs that have been announced have a cat-in-a-dog fight’s chance of succeeding,” Gillott opined, noting that several MVNOs have claimed they’re going after similar audiences: young adults, 18- to 35-year-old males, etc. “So while the MVNO is supposed to open up the wireless market to underserved segments, they appear to mostly be chasing the same money.”
He estimates “upwards of 70 percent” of MVNOs to fail, and that the industry will begin to see fallout in late 2006 or 2007.
Amoroso noted that the prepaid market is becoming packed with competitors offering similar products.
“There are so many that the customer can choose from in the off-the-shelf, prepaid market,” Amoroso said. “It’s not just about launching, it’s launching something compelling.”
Still, John Caddell, vice president and general manager of MVNGO, says that his company has been seeing “a tremendous amount of activity from very serious players.”
A Motricity survey of conference goers at the MVNO Summit in December showed that nearly half believed that the youth market of people under the age of 16 would be the primary target for MVNO in the next two years. Almost 75 percent expected that there would be a significant amount of consolidation in MVNOs during the next three to five years.
They also considered brand affinity to be more critical to an MVNO’s success than its pricing. Caddell believes that two other factors ultimately will decide whether an MVNO thrives: operational execution and the strength of its distribution channels.
“It’s a lower margin operation, which means you have to manage it very carefully,” Caddell said. As far as distribution, he said he’d rather have a strong or exclusive distribution channel than a strong brand.
“Just putting a brand name on a phone isn’t going to be worth that much,” Caddell said. “I’d rather be the only phone in a retailer than be on the shelf with 25 other prepaid phones.”
While Caddell says that MVNOs will unquestionably see fallout, he said he doesn’t expect consolidation to become a significant part of the picture until perhaps 2008.
However, early signs may be popping up. InPhonic, a computer products and services company with an MVNE platform and its own MVNO, announced last week that it sold the wireless subscriber base of its Liberty Wireless MVNO and the Spanish language Viva Liberty brand to Canada-based TelePlus Wireless Inc., an MVNO subsidiary of Canada-based TelePlus Enterprises Inc., for $1.9 million. InPhonic said it would report lower-than-expected fourth-quarter profits but that the sale would enable it to focus on its MVNE business. The company said it would continue to provide MVNE services to TelePlus, which is seeking to expand its U.S. MVNO.
The progress MVNOs make in 2006 is likely to shape the market significantly, according to Yankee Group’s Amoroso.
“How well they do and what traction they get in the market will definitely play a role in other players getting into the market,” Amoroso said. “2006 will be a year of impact.”
