Product Type: Market Research Report
Published by: Pyramid Research
Published: August 2007
Product Code: R8-569Description The MVNO business has never been as good an opportunity as the initial hype would have had you believe, but in our view, it is not as hopeless as the negative publicity of the past year suggests. A review of the performance of MVNOs over the past five years yields a number of salient lessons on the business model, and provides enough material to establish what works—and what does not appear to work.
MVNO models can be made to work, and there are MVNOs with proven track records of success, according to our new research study Rethinking MVNO and MVNE Economics: the Future of Mobile Virtual Models . The report provides an in-depth examination of the economic factors behind the failure of many MVNO models and the successes of others. The picture is not all negative: the gloom and doom predictions regarding the MVNO market fail to acknowledge that the global MVNO subscriber base grew by 24% in 2006, to reach 84m users. There are profitable MVNO operations, from Virgin Mobile and Tesco Mobile in the UK to TracFone in the US. Moreover, interest in becoming an MVNO has not faded away by any means; the list of the companies exploring the MVNO opportunity continues to include big names from a range of markets.
Building on an extensive analysis of MVNO profitability and overall performance to date, Rethinking MVNO and MVNE Economics: the Future of Mobile Virtual Models outlines what works and what does not work with today’s MVNO business models. The report deconstructs MVNO economics, provides insights into the MNO business case for hosting MVNOs, and reviews the MVNE model and its role in making the MVNO model work.
Key questions answered
- What are the economic realities of the MVNO business? How do the key margin indicators compare among the prepaid MVNOs, cost-heavy MVNOs, and traditional mobile players?
- Can MVNOs make money? What have been the key drivers of profitability—or lack thereof?
- Does the MVNO model make sense for content providers?
- How should the MVNO model evolve to be successful?
- What is the business case for an MNO to host MVNOs? How has the entry of MVNOs affected mobile markets?
- What are the ingredients for successful MNO-MVNO partnerships? How have MNOs prevented cannibalization of their revenues after partnering with MVNOs?
- Do MVNOs need MVNEs? How is the MVNE role evolving to make the MVNO model work?
Table of Contents
- Acronyms and abbreviations
- Companies mentioned in this report
- Executive summary
- Section 1: Operational models, market models, and MVNO profitability
- 1.1 Operational models: coming full circle?
- 1.2 Niche-focused market models: still struggling in the US, working elsewhere
- Section 2: Breaking down operational models: the problem with MVNO CPGAs and CCPUs
- 2.1 Understanding MVNO economic levers
- 2.2 CCPU: The wholesale cost drag
- 2.3 Looking for net present value in MVNOs
- 2.4 The bottom line still looks bad, but the model can work
- 2.5 What works, what doesn’t
- 2.6 Mapping the risk of MVNO models
- CASE STUDY: On-device portals
- 2.7 The future of the MVNO: The next-generation model is an old model, and that’s just fine
- CASE STUDY: Amp’d Mobile-Telus—a blueprint for the media MVNO?
- CASE STUDY: Ad-based MVNOs—the doubtful cases of Blyk and Xero
- CASE STUDY: Comcast, Sprint, and Pivot—using the MVNO model to drive quad-play convergence
- Section 3: The MNO conundrum: To host or not to host
- 3.1 The MNO business case for hosting MVNOs
- Drivers for developing a wholesale business
- The upside of the wholesale business: Market shares, revenues and NPVs
- The downside of the wholesale business: cannibalization, price wars, implications of failing MVNOs for MNO businesses
- 3.2 What types of MNOs should pursue the MVNO channel?
- Examples of wholesale business models
- Section 4: MVNEs—the future of MVNOs?
- 4.1 Redefining MVNEs
- 4.2 Why MVNOs need MVNEs
- 4.3 MVNEs evolve: up-front fees, recurring fees, and reselling minutes
- 4.4 The future of the MVNE: back to a pure outsourcing model
- CASE STUDY: How MVNEs can affect MVNO growth—the case of the Netherlands
- Section 5: MVNOs have market traction—they are here to stay
- Table of exhibits
- Exhibit 1: Snapshot of MVNO operational models
- Exhibit 2: A map of MVNO market models
- Exhibit 3: MVNO economic levers
- Exhibit 4: MVNO vs MNO CPGA (US$)
- Exhibit 5: MVNO vs MNO subsidies in the US (US$)
- Exhibit 6: Subsidies, channel costs, and marketing costs—MVNOs vs. MNOs in the US market
- Exhibit 7: Estimated MVNO CCPU vs. MNO CCPU in the US and UK markets
- Exhibit 8: Net present value key assumptions for MNOs and MVNOs in the US and UK markets
- Exhibit 9: Subscriber net present values of sample MNOs and MVNOs (US$)
- Exhibit 10: A map of the risks of the MVNO model
- Exhibit 11: Sprint Nextel: Wholesale subscribers and revenue
- Exhibit 12: Sprint Nextel wholesale net subscriber additions
- Exhibit 13: Telfort and market share evolution in the Netherlands
- Exhibit 14: Virgin Mobile’s contribution to T-Mobile UK’s subscriber growth
- Exhibit 15: NPV sensitivity analysis
- Exhibit 16: TDC Mobil’s channel composition and profitability
- Exhibit 17: E-Plus’ revenue and EBITDA growth is boosted by wholesale customer additions
- Exhibit 18: MVNO market share in Belgium, Denmark, France, Germany, the Netherlands, the UK, and the US
- Exhibit 19: MNO ARPUs in Denmark before and after consolidation
- Exhibit 20: MVNE mapping
- Exhibit 21: Historical and projected MVNO subscribers, 2004-2012
- Exhibit 22: Regional breakdown of MVNO subscribers, 2004-2012
- Exhibit 23: MVNO subscribers as percentage of regional subscribers, 2004-2012
- Exhibit 24: MVNO service revenues by region, 2004-2012
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