Convergence opens new channels

As competitions intensifies, MVNOs have no choice but to evolve beyond being simple consumer-oriented, voice-centric resellers of wireless services. At the very least, they need to develop a more viable value proposition as well as a profitable economic business model

Understanding the model

Some MVNOs completely rely on the underlying wireless network infrastructure of the host mobile network operator, whereas others collaborate with mobile virtual network enablers (MVNEs) to provide differentiated services. An MVNE offers infrastructure and related services ranging from network element provisioning, administration, and OSS/BSS support to MVNOs, helping them provide their own differentiated services to customers while using the host mobile network for only radio and switching infrastructure.

In the past, larger operators were not interested in focusing on niche markets and sub-segments as it was expensive and complex, and such markets were considered better served by MVNOs. However, increasing competition brought on by market saturation is forcing larger operators to focus on closely targeted markets that their traditional one-size-fits-all retail portfolios had never addressed before.

Intense competition between existing players, coupled with the entrance of new market players (wireline operators providing wireless services), will force larger players to enter the MVNO space, putting service revenues for current MVNOs at risk.

Traditional wireless and wireless players are likely to try to acquire MVNOs. For instance, Australia's second largest operator Optus acquired the remaining 74.15% stake in Virgin Mobile Australia recently. Optus will now be able to leverage the MVNO's suite of youth-centric services and cheap offers to target specific market segments.

Broadband provider NTL may acquire Europe's Virgin Mobile, which shows that MVNOs are also logical acquisition targets by triple- and quadruple-play companies. This is because the value of MVNO model can be used by pure-play VoIP service providers, ISPs and other firms looking to add wireless to their mix of service offerings.

MVNOs are likely to be targets of consolidation as well, which may leave only a few viable ones to dominate. An early sign of this is the take over of Liberty Wireless by Canada-based Teleplus Wireless, a MVNO subsidiary of Teleplus Enterprise.

The net impact of these trends is that larger operators are keen to attack the traditional MVNO space and tap into niche markets. To survive such acquisitions and take-over, MVNOs will have to evolve beyond being simple voice-centric resellers of wireless services to a more sophisticated breed - convergent virtual network operators.

Evolving to CVNOs

Fixed to mobile convergence (FMC) is rapidly reshaping today's telecoms industry. With IMS architecture, which is able to blend Internet principles with 3G wireless network capabilities, acting as a catalyst, FMC will open up new opportunities for MVNOs.

It will enable them to penetrate the convergence market by collaborating with VoIP carriers, broadband providers and content providers more easily and effectively, and leverage new and emerging technologies to offer more differentiated services.

A case in point is IPMobile, a mobile broadband communications service provider that has plans to deploy services in Japan's three major cities.