What are the Major MVNO Opportunities?

Where are the most-significant mobile virtual network operator niches? The answer might hinge on what sort of market the MVNO operates in, as well as existing assets the MVNO can exploit.

There are six common market entry strategies, according to Peppers and Rogers Group.  

1. Low price: These companies offer frugal plans, often with only simple voice and SMS services, limited data, and inexpensive devices. MVNOs selecting this strategy target price-conscious customer segments with a limited marketing budget, utilizing traditional sales channels such as physical stores rather than alternative channels.
2. Content and applications: The focus here is on exclusive content offerings, such as music, videos, games, or certain sports content bundled with mobile plans or devices. They target customers who are active in digital channels and interested in specific content. The main differentiation point among these MVNOs is the ability to provide content and applications that are not available from other operators.
3. Convergent services: Some MVNOs offer all-in-one services encompassing service lines such as fixed Internet or pay TV, along with mobile service. They are also referred to as XVNOs, stressing the variety of their service lines. Customers receive one combined bill for all the different services provided by the XVNO, which has a positive effect on the customer satisfaction level.
4. Segment-focused: These MVNOs serve very specific segments, such as expats, youth, business customers, migrants, or others. The main differentiation point among segment-focused providers is their narrow focus on customers who may not be covered by other operators in the market.
5. Retail presence: These operators have retail background and rely on strong distribution channels offering cheaper plans and easy accessibility. They focus on customers who are already part of a retail network, so marketing efforts mainly consist of in-store activities.
6. Service differentiation: Looking beyond products, these MVNOs integrate telecom products and services with loyalty programs, financial services, or other services related to a company's or group's assets and resources. For example, a technology retailer integrating its customer loyalty program with a group's MVNO can allow customers to earn points as they talk on their mobile phones and use these points in the stores to upgrade their phones. MVNOs selecting this strategy tend to create a closed loop network with group-level synergies offering customers a unique proposition.

Some might say common niches include segmentation based on:

1. Ethnic group (often anchored by cheap long distance calling)
2. Lifestyle (most often, younger users)
3. Discount
4. Subsidized, ad supported or zero rating, at least in part

Note that three of the four major approaches involve price discounts in a direct way.

McKinsey has identified five key success factors for MVNOs. Companies that launch successful MVNOs often make use of existing marketing assets like media and telecoms brands, customer databases, and channel infrastructure.

They strive to create a unique brand positioning and value proposition in order to attract target clusters such as specific ethnic groups or demographic cohorts like millennials.

This typically means identifying emerging niche markets that lie beyond the reach of traditional marketing approaches or are too costly to serve or address using a conventional business model.

source: McKinsey

There are eight major opportunities exploited by MVNOs, according to GSMA Intelligence:

• Discount
• Telecom
• Media/entertainment
• Migrant
• Retail
• Business
• Roaming
• M2M

“Discount” and “telecom” approaches account for 47 percent of the global MVNO market, perhaps in large part because the MVNO approach so often is taken by a facilities-based telco to compete out of region.

Some 18 percent of MVNOs are operated by companies from adjacent industries (retailers, banks, TV or media organisations).

Some 35 percent of the MVNO market ois focused on segments such as business, migrant, M2M and roamers.

For example, in the media/entertainment sector, Virgin Mobile reported more than three million connections for its UK brand in the third quarter of 2014, while in retail, Italy’s PosteMobile had 3.2 million accounts.

source: GSMA Intelligence

GSMA Intelligence has also recorded 260 MNO sub-brands spread across 56 countries.

Sub-brands differ from MVNOs in that they are wholly-owned and operated by their facilities-based mobile operator  parent, despite being marketed independently of that MNO.

Some MVNO brands also operate as MNO sub-brands; those that have international presence include Virgin Mobile, which is a sub-brand in Australia, Canada, India and the US, and Red Bull Mobile, which can be found in Austria, Belgium, Hungary, Poland, South Africa and Switzerland.

Some 48 percent of sub-brands offer prepaid tariffs only, while the proportion that are contract-only stands at 21 percent.

Sub-brands tend to be focused on prepaid tariffs as, like MVNOs, they are used by operators to attract new customers in lower price segments without diluting their core brand proposition or exposing it to excessive price competition.

As such, the use of sub-brands is a strategy that tends to be limited to mature, saturated markets in Europe, Northern America and Asia Pacific – the average penetration rate for countries that feature sub-brands stands at 127 percent.

In terms of categories, discount, media/entertainment and retail take the largest share of the sub-brand market with 38 percent, 23 percent and 16 percent respectively.