17 thoughts on “A MVNO Train Wreck Coming?”

  1. I totally aggree that MVNO’s are just resellers, but I do think very positively about the idea of an Apple-branded mobile reseller.

    Amongst the MAC community, the Forbes piece has created a stir; and while not factual I can see the benefits to Apple and a carrier of going forward. I’ve posted the details at http://www.bitpad.com. I see a lot of Pros, not too many Cons. Nike as an MVNO on other hand may have much less of an opportunity.

  2. The Forbes piece is not something new. A few bloggers had suggested this as far back as the time when the rumors of an iPhone first emerged. That is just shoddy piece and should not have even been contemplated. irresponsible is what I think, and frankly, the complexity of a MVNO cannot be under estimated. Just my thoughts…

  3. Except… as Qwest demonstrated, it is possible to roll your customers off one network onto another without killing your business. The operator has outsourced the customer relationship, and that’s stickier than wholesale connectivity. It isn’t easy to swap network providers, as many customers will over time have self-selected themselves to match the original operator’s coverage footprint. But it can be done, and in places like Europe, Japan and Korea where all networks have near-total coverage, it’s a real possibility.

    As for an Apple MVNO, I very much doubt it. Too US-centric for a global brand, too much unfamiliar operational stuff to deal with for a tech product company. If anything, they’ll partner with someone like T-Mobile who is lagging in the market, and happy to take whatever bit-pipe revenue they can get. But not an MVNO.

  4. Apple may not care about the razor-thin margins of the MVNO business, as they continue to focus on hardware to drive their business. Personally I think it’d be great – I don’t hear many people say “Man, I love my mobile phone provider” – but ask them about their iPod. Apple needs to protect themselves from the mobile industry which obviously wants that music revenue – or, more correctly, the data revenue – particularly from the high-speed networks.

    I think it is unlikely that Apple would launch an MVNO, but they are missing an opportunity in my opinion. Apple marketing and coolness would be a differentiator in the increasingly boring mobile phone business.

    I wrote more about this at:

  5. You’re absolutely correct that signing on with a cell carrier as an MVNO partner involves a lot of trust on the part of your Virgins, your Disneys, and your ESPNs of the world, but the potential upside is pretty huge if things work out well. We’re not talking about pennies per subscriber here. If the subscriber stays on for more than a year, the profits become highly leveraged.

    You’re right to be skeptical that every company in the world can be a successful MVNO partner, but it really does come down to brand positioning more than anything else. Why does Virgin work? Because it’s a pre-paid model aimed at the youth market who may not have the credit yet for a normal plan. This is a pretty huge market and Virgin’s already strong image among youths has helped them capture it. It’s not looked at as an option “for the poor”, but rather an option “for the hip”, which is exactly what Virgin banked on.

    Now let’s examine Disney and ESPN. I have pages and pages to say about this, but having worked there for the last five years, there’s obviously a lot I can’t divulge. Let’s start with ESPN though. Strong brand? Sure. The strongest ever in the world of sports in fact. Hip enough to cause a large bit of the population to *have* to have an ESPN phone? Maybe. That’s what they are banking on. If the phones offer enough exclusive content to entice the masses, then it will succeed. If not, it will fail. I won’t offer my opinion on how I think it will play out. That’s for the public to decide.

    Now Disney. Strong brand? Again, the strongest money can buy. Their sweet spot is kids younger than the teens Virgin is aiming at. This MVNO will succeed, in my opinion, if the market for cellphones among kids grows as most people think it will over the next few years. Disney is a brand kids and adults trust and that is their unique selling proposition.

    And finally, Apple. I put my thoughts about an Apple phone and MVNO here about a year ago so I won’t repeat everything, but the tests remain the same: is their brand strong enough to create a “must-have” situation (yes) and is the market they have influence over big enough to make it profitable (I think so).

    I think the situation you speak of with every company in the world wanting to be an MVNO partner certainly would fail, but I also don’t think it will happen. You wouldn’t believe how much money it costs to even *research* the feasibility of doing an MVNO deal. It’s enough to keep the little fish from even attempting it.

  6. “In the wired phone business of course! before some dude came-up with the term MVNO, there were hundreds of resellers who would buy wholesale and sell retail. They had razor thin margins and their existence depended on the largesse of the large phone companies”

    It wasn’t the “largesse” of the RBOCs. They had to by regulatory to lease out components of their network hence the rise of the resellers.

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  9. Om,

    I agree with that an Apple MVNO is unlikely and the Forbes article was not the most well thought through.

    I don’t, however, buy your analogy between MVNOs and CLECs/wireline resellers. Most of the announced MVNOs bring a strong brand and some bring content. That’s what they are selling and can usually get more revenue and get it a premium to what the carriers can bring,

    The resellers were purely working an arbitrage game and when the wireline carriers reduced their retail prices, that game was over.

    MVNOs can use the infrastructure of the wireless carrier as another platform to leverage their brand and content from. Said more simply, who’d you prefer to get you sports clips from: ESPN or Cingular? Your Disney trailers from Disney or Verizon?

  10. Mobile Virtual Networks Operators (MVNOs) leverage the existing capabilities of wireless carriers to create unique offerings for their customers. MVNOs are not simply resellers.

    Resellers distribute product without adding value to the core product. MVNOs add value to the base product by incorporating something customers have already demonstrated an interest in.

    Unlike large wireless carriers MVNOs target very specific (niche) customers which gives them much more flexibility when it comes to creating new offerings. These companies can develop services that are meaningful to me.

    Resellers increase access to product where MVNOs create new product offerings based on the demand of their target market. When I’m at Best Buy, Walmart, Target or Circuit City I don’t notice a shortage of phones but I never seem to be able to find a phone that does what I want.

  11. I am on the other side of the fence i.e. I work for a mobile operator and MVNOs are being embraced for a number of reasons.

    • the opportunity to gain market share (albeit indirectly) in market segments where we under-perform e.g. targetted content;
    • expand distribution channels e.g. super market deal
    • capture a new source of revenue as voice margins are squeezed.

    The right MVNO partnerships are seen as a clear opportunity (that can be controlled by the commercial relationship) rather than a threat. It’s a cliche but is must be a win-win relationship. If you want to realise your revenues as a host network you must offer the MVNO the price they need to succeed in the market.

    By the way do not kid yourselves that MVNOs have tiny margins, they have much lower costs, no handset subsidies, limited marketing and operational costs and so in relative terms do not need huge margins. Based on some public Virgin numbers I have seen I would not feel too sorry for the poor MVNO struggling to make ends meet.

    Sure, smaller MVNOs will struggle but if there is no demand for their offer then pricing will not make the difference and they should not be in the market. MVNOs are the latest gold-rush in telecoms and in 3-5 years many will have been bought or folded with e.g. 3 controlling 90% of MVNO subscribers in each European country (see netherlands now)

    Of more interest in 2006 will be whether non-tech brands take the plunge, will Nike launch as an MVNO and if so what will the offer apart from the cool brand? Maybe that is enough??? Interested to see what you think.

  12. Amazing, a discussion about Apple launching as a service provider from summer 2005, now it’s approaching summer 2006 and the same story has re-emerged – and I would go so far as to say it sounds like a record with a scratch in it.

    Here’s a wild one…RIM ape Apple and launch BlackBerry MVNO. I’ve got nothing to back this up with and no input from RIM, but if Apple can why not BlackBerry (RIM)? Focus would be on enterprise data users and the network could be global – with their name they could come to agreements with so many operators easily – maybe even pal up with a big name like Vodafone so they can be a global MVNO. Well, not Vodafone. Any suggestions on a global MNO who would want a slice of a global MVNO?

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