CAMBRIDGE, Mass.—Pyramid Research issued a cautious view of the young mobile virtual network operator market in its latest report, “MVNOs and MVNEs: Analyzing the Viability of Virtual Mobile Players.”
The firm said MVNOs face a variety of challenges and the segment’s financials may not live up to the hype.
At the end of last year, MVNOs served more than 63 million subscribers worldwide, or 2.75 percent of all mobile users, a 25-percent increase from the year before, according to the report. By 2010, Pyramid predicts MVNOs will account for about 3.3 percent of mobile subscribers, or 100 million users.
Despite some early signs of success, MVNOs are generally operating in a loss-making state or just above breakeven, said Pyramid. The firm noted Virgin Mobile U.K. is profitable after six years in operation. In the United States, Tracfone Wireless Inc. posts earnings before interest, taxes, depreciation and amortization margins of around 10 to 15 percent, it said.
“The traditional MVNO model has long been a cost story, with the MVNO venture focusing on reducing costs and churn while anticipating lower ARPU levels mainly as a result of its predominantly prepaid subscriber base,” said the report’s author, Guy Zibi.
The analyst firm said the coming two years will make or break many MVNOs, especially those that focus on prepaid customers.
