A Second Wave of MVNO Growth Coming?

In January 2014, China issued 11 MVNO licences. In March 2014, Virgin Mobile acquired a MVNO licence from Saudi Arabian regulator. Those are potentially-important agreements because in many markets in the Global South, it has not been possible to lawfully operate as a mobile virtual network operator.

It is impossible to say how well such new MVNOs might fare. But past experience suggests that, in most markets, growth much beyond 12 percent customer share could be a challenge.

In 2009, for example, the market share held by MVNOs in Western Europe and North America was about nine percent, according to TeleGeography.

Globally, MVNO market share was about one percent. So MVNOs were a significant market presence only in two regions.

But logic would suggest that growth will occur in most markets globally where MVNOs either are not legal or commercially viable because carrier interest in supporting wholesale is low.

Asia is one of the regions where MVNO market share could be poised to grow from 50 percent to 100 percent annually, albeit from very-low installed customer bases.

The long-term issue is how much market share such new MVNOs might gain.

At least so far, it has proven difficult for MVNOs to break out from about 12 percent market share, perhaps because many MVNOs have focused on the “value” segment of the market, and “standard” offers from the facilities-based carriers have grown in that segment as well.

Whether that also will be the case in MVNO markets in the Global South is the issue. One might note that retail offers already are fairly aggressive in those markets. That suggests niche market strategies will be important, as the lure of “lower price” will be harder to create, than has been the case in Western Europe and North America.

By 2011, a separate analysis by Pyramid Research suggested MVNO adoption had reached about 12 percent, while in other regions MVNOs had less than three percent market share, most less than one percent market share.

That lead Analysys Mason to suggest that MVNO market share had essentially reached its limit, in Western Europe. To the extent that growth remained, it would come from wholesale-based offers adopted by device suppliers and service providers targeting market niches.

But in 2011, Scandinavian MVNOs faced falling market share. Denmark’s MVNO penetration fell to 4.2 percent from a peak of 10.9 percent.

In Finland, MVNO share fell to two percent from a peak of 11.7 percent. In Sweden, MVNO share dropped to 0.4 percent from a peak of three percent.

In 2010, there were abut 60 U.S. MVNOs in operation, according to the Federal Communications Commission. Most were quite small, but Tracfone had about five percent market share, earned by focusing on prepaid customers with low average revenue per user.