MVNO Business Models Are Problematic

Forget the fact that there are over 600 MOVNO’s (Mobile Virtual Network Operator) in operation worldwide. They are problematic from a strategic, operational and financial perspective. The key benefit of a MVNO model versus the build and own model is cost. It’s much cheaper to build and manage an MVNO than to build and manage an entire wireless network. So if you want to get in the wireless game on a shoestring budget then the MVNO model is the way to go.

But….there are drawbacks. First, the network operator that you need to partner with holds all the cards so it’s crucial you pick a partner that you can work with for the long term. The MVNO has limited negotiating power unless they bring something to the table the network operator needs/wants. Establishing competitive wholesale rates at the very beginning is crucial and to do that there should be a mutual benefit. If the negitiation is one sided then the MVNO will likely end up entering in to a bad deal.

Second, the MVNO has limited pricing flexibility. In the highly competitive wireless industry where rates change on a daily/weekly basis you need to have flexibility to respond quickly while doing it profitably. If you have to turn to the network partner for pricing approval or for support to launch a competitive rate plan you can lose market share.

Third, the MVNO does not own the entire customer experience. Network performance is a key dimension of the customer experience with wireless networks. An MVNO is relying on the network operator to ensure consistent data and voice call quality which can be a flash point for customer satisfaction.

Obviously with 600 MVNO’s in operation the business model warrants due consideration but it can be a problematic business model if the partnership is not balanced.

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