The hype surrounding mobile virtual network operators has created a new segment of the mobile industry with MVNO enablement, and a myriad of companies are eager to tell would-be operators the best way to plunge into the MVNO space.
Last week, DBS Communications launched an MVNE called Versent Mobile. Meanwhile, the Besen Group announced that it started a specialized consulting arm just for MVNEs; Besen already launched an MVNO consulting operation in January.
Industry research firm Pyramid Research said in a recent report that it has identified 39 companies that are primarily MVNEs, along with infrastructure and IT companies that are trying to get in on the action. Among the most well-known are Visage Mobile, TMNG and Boston Communications Group Inc., which began offering MVNE services last March.
DBS has run its own prepaid MVNO, EZ Link, since 1998, and counts around 120,000 customers. DBS said it’s leveraging that experience to try to gain traction in the MVNE market. Company officials noted they decided to get into the MVNE business after Cingular Wireless L.L.C. steered kid-centric Firefly Mobile their way for help in making its launch in early 2005.
“We very much see it as a complementary and parallel path related to our strategic direction,” said Laren Whiddon, chief operating officer of DBS. He said that while DBS focuses on urban ethnic markets and sells through local retailers, convenience stores and some liquor stores, most of the 20-odd clients it has in its pipeline are looking at other niche segments.
While Whiddon and Scott Merkle, DBS senior vice president, declined to specify which companies they’re working with, they described customers ranging from “large national retailers” to a “well-known” national recording artist “who has branched into fashion and other ways” to leverage name recognition. At this point, DBS’ core offering is for prepaid service; some analysts predict that as much as 80 percent of the prepaid market ultimately will be taken over by MVNOs.
Whether DBS can succeed remains to be seen, although Firefly attracted a significant amount of attention in the youth market. Last year, however, MVNE/MVNO InPhonic Inc. opted to sell off its Liberty Wireless and Spanish language Viva Liberty MVNO brands and customer base so that it could focus on its MVNE operations.
Among the MVNOs that have already announced or launched are Amp’d Mobile Inc., Disney Mobile, Helio Inc. and Faith Inc.’s Voce. Mobile ESPN kicked off its nationwide services offering on Sunday at Super Bowl XL. Wal-Mart recently announced plans to launch an MVNO in Europe, but made no mention of a U.S. entry. As Pyramid puts it, the high-end or strong-brand MVNOs poised to enter the marketplace are “transforming the dynamics of the MVNE market”-although not every MVNO will use an MVNE.
With MVNOs depending largely on customization to set themselves apart from the traditional wireless carriers and other virtual network operators, their demands for tailored products mean higher costs, Pyramid said. MVNEs will want to introduce unique applications quickly and keep costs low-and in order to cope with MVNO’s needs, MVNEs might end up consolidating in much the same way that MVNOs are expected to.
“[MVNOs] will require more flexibility than their partners in setting commitments, which some MVNEs lacking diversified revenue streams will find difficult to adjust to,” Pyramid explained. “In order to gain more flexibility and cater to MVNO’s cost limitations, MVNEs will look to increase the number of MVNOs on their shared platforms, potentially through mergers and acquisitions.”
There is no clear picture yet of how many MVNOs the market can support-estimates range from 30 large MVNOs (estimate by MVNGo, an MVNE, and Global Advertising Strategies) to a tiered market with six large operations, five medium and roughly 25 small MVNOs (Yankee Group projection). Even the number of customers an MVNO needs to be successful is under debate. DBS says it could be as few as 100,000 customers. A much higher estimate is between 300,000 subscribers to break even and a million customers to thrive, from Robert Laikin, chief executive officer and chairman of the board of Brightpoint Inc., which offers distribution, warehousing and logistics services for telecommunication companies, including MVNOs. And it also remains to be seen how well MVNOs will be able to support themselves and their business partners. “I don’t see a big space for new MVNEs,” Laikin said, adding that MVNEs often can be valuable in helping companies with no experience in the wireless space avoid pitfalls, but that “the margin for error for an MVNO is very slim. If they make a bad product, they can lose millions of dollars.”
