Deutsche Telekom (DT) recently announced the end of its relationship with German MVNO and service provider Drillisch.
DT accused Drillisch of connecting 30,000 “ghost SIMs” (connections with no associated customer relationship) for which the MVNO has been paid commission. The connections all relate to the “SIMply” discount MVNO brand, and DT claims that it is owed approximately €1.3 million.
Drillisch denies all the accusations, and has responded by moving the customers to another network. We believe that this network is Telefonica’s O2, which has an existing wholesale relationship for some of Drillisch’s SIMply customers.
This story again raises the questions: are MVNOs a friend or foe to traditional operators? And which is the right MVNO wholesale business model for mobile network operators?
MVNOs should be a way for mobile operators to reach new customer segments, and they should provide some benefit to MNOs. This could be by providing a new distribution channel, the ability to serve a niche segment that an MNO can’t reach because it can’t customize to that level, a strong brand resonance with a key customer segment (such as ethnic groups or young users), or a more profitable way to reach a particular market segment (i.e. very low-usage customers).
However, MVNOs should never be a direct competitor to their host as once an MVNO starts to cannibalize its host’s customer base, cracks will begin to appear in the relationship. If an MVNO becomes a very large player with increasing market power, the balance of power in the relationship shifts. The dynamic of the relationship changes as the potential risk of a large MVNO customer moving host providers becomes a significant threat to the MNO’s business rather than a channel for additional revenues.