MVNO – Mobile Virtual Network Operator

By: Diane Shired, CTM

Meaning of MVNO – "Mobile Virtual Network Operator", is a mobile operator that does not have its own network. It is also a company that works independently of the operator and can set its own tariff structure. They resell wireless service under their own brand name and use the network of another mobile phone operator. MVNO operators have business arrangements with other mobile operators to buy minutes for use to sale to their own customers. Currently there are more than 85 MVNO’s worldwide with most located in Europe, some in South America. MVNO’s are mainly a European, GSM concept, with resellers in the U. S. This concept is most likely to become very popular in the U. S. and other parts of the world.

Many are familiar with reselling telecom services such as local exchange, long distance and mobile network services. MVNO’s add such value as brand, distribution channels and other attractions to help resale mobile services. MVNO’s are usually well known companies with a lot of marketing clout such as advertising in grocery stores. They also have financial resources and agreements with existing operators to provide a good service coverage area. Not only do MVNO’s offer value added services they have full control over SIM (Subscriber Identity Module) cards, branding, marketing, customer service operations and billing. Sometimes they offer Operational Support Systems (OSS) and Business Support Systems (BSS) to support the MVNO.

Other Related Definitions:

"MVNOs offer two advantages to network operators. First, they enable operators to attract new market segments and, thereby, to load their networks more quickly than otherwise would be the case. Second, they enable operators to devolve marketing, sales, billing, customer relations and related "front" and "back " office functions to specialist companies that may provide those functions more efficiently than can the operators themselves. However, there are, at least, two disadvantages. First, MVNOs may "cannibalize" customers – draw customers that might otherwise have been attracted by the operator. As a consequence, an MVNO might perturb the sales force that the operator already has in place. Second, more competitors in the market will drive down tariffs, thus putting greater pressure on margins of operators, as well as those of MVNOs. The fact that MVNOs continue to surface indicates that some operators perceive their advantages as outweighing their disadvantages.

There are advantages and disadvantages for MVNOs, as well. The greatest advantages center on leveraging already high brand equity into mobile services. Typically, the brand equity is strongest among a market segment that a conventional network operator does not effectively reach. Thus, Virgin Mobile in the U.K. uses the Virgin Brand to attract the youth segment. It also uses its mobile arm as an additional distribution channel for its other products and services. For example, order a Virgin CD over a Virgin phone and receive a 10 percent discount. Disney, in the U.S., will likely do the same. The disadvantages in becoming an MVNO center on the high costs of market entry. These might seem minimal in that an MVNO does not need its own network. However, it does need supporting infrastructure. This encompasses, at least, marketing and sales, advertising, distribution, channel relations, customer relations, billing, and fraud control. Only entities that already have many of these elements in place can succeed as MVNOs. Otherwise, the cost of market entry will prove too high." [published by The Shosteck Group ]

"The past six months have seen a slew of MVNOs appear across Europe. The Scandinavian countries and the UK lead the field in terms of established MVNOs. Of a total of 50 such companies strung across Europe, Norway is home to 15, Sweden nine and the UK eight. They all boast a strong brand name and have begun to appeal to a laded mobile industry, which is finding it increasingly hard to acquire new consumer subscriptions. By aligning themselves with a network operator, the MVNOs offer a new outlet for sales and promise the mobile company stronger customer loyalty in the bid to fight churn. (In the UK alone it is estimated that up to ten million customers switch service providers every year.) " [Telecommunications - by Ross Parsons]

Related Links:

BlackBerry - BT To Offer BlackBerry In Europe
Motricity - Mobile Virtual Network Operators (MVNO’s)
ValueFirst - a leading Mobile Virtual Network Operator (MVNO) for data services

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