There's little chance that the huge number of companies worldwide -- more than 200 - that are employing the MVNO (mobile virtual network operator) business model will attain success, a new report has suggested.
Although the MVNO business model has been used since the mid-1990s and remains popular, the surge in the number of MVNO launches in the past two years has made it harder for firms to become competitive, a report from Analysys revealed.
In addition, the future holds a number of challenges for existing and would-be MVNOs, with new technologies, such as VoIP over cellular networks, further reducing the prospect of high revenue margins in the mobile market, said Analysys.
"Until recently, most MVNOs were similar and offered no-frills services, often based on prepaid voice at prices undercutting the incumbents' offerings. A number of companies have made a success of this business model, and there is still scope for it to be used efficiently in some markets, especially by organizations such as large retail groups with well-known brand names,' said Emma Buckland, the report's lead author.
"However, some new MVNOs have shunned the no-frills business model altogether and are concentrating on offering data and content services to niche markets. At the same time, fixed and cable operators are increasingly choosing to extend their service portfolios by using the MVNO model to enter the mobile market."
The other findings from the report include:
-- Mandatory network access, i.e. the obligation on mobile network operators to open their network to virtual players, is a key enabler of MVNO success, in particular for voice-focused MVNOs.
-- Except in regulated markets, MVNOs rarely enjoy a market share of more than 5% in terms of subscriber numbers, not least because very successful MVNOs often get bought by existing telecoms players.
-- For MVNOs that specialize in content provision, there are significant challenges to be faced, given that the demand for non-messaging data services (often the core of their offerings) remains unproven in most countries.