MVNOs on the rise

There are almost 1,000 MVNO operations worldwide, but where did this phenomenon come from?

Question: What do an accident-prone balloonist, a cut-price German supermarket chain and an Omani mobile network operator have in common?

Answer: They are all exponents of the mobile virtual network operator model (Richard Branson, through his Virgin Mobile brand; Lidl, a recent MVNO entrant in the Hungarian mobile market; and Nawras, the first Middle Eastern operator to make its network available to virtual operators).

As the number of MVNO operations in the world nears the 1,000 mark (not the same as the number of MVNO companies, as many of these have numerous operations in different territories, sometimes more than one in the same country) it is a good time to reflect on the evolving nature of that model and its relevance to our credit-squeezed times.

The ever-innovative Scandinavians gave us the first MVNO in the 1990s. Regulators spotted that a wholesale arrangement between the operators of existing infrastructure and new assetlite players, not necessarily from the telecoms game at all, would deliver greater competition to a sector dominated by a few large names. A virtual operator, reasoned the authorities, could set up quickly and cheaply, and provide an additional revenue stream for its licenced host. MVNOs in Scandinavia grabbed a market share above 10% within a few years of the idea being invented.

The basic model has now blossomed out into many variants, and spread well beyond its European roots. There are MVNOs for non-consumer markets, and those that specialise in M2M data traffic. Many have a highly specific ethnic or cultural specialism. There are nearly 50 MVNOs that get most of their business from mobile broadband services, not voice. The number of MVNOs globally has almost trebled in the last three years alone.

An important growth area is markets where capital for the launch of new physical networks is limited. It’s no coincidence that retailer Lidl is experimenting in recession-hit Hungary. Similarly, Cypriot telco Cyta Hellas plans to enter the Greek market as an MVNO during 2012. And with spectrum a scarce commodity in many wealthy economies, an MVNO doesn’t just bypass the need to build their own cell towers. They can use the fruits of somebody else’s spectrum allocation too.

Guy Matthews can be contacted at: guy@transom-enterprises.co.uk

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