After a faltering start, the US MVNO sector has reinvented itself. Guy Matthews considers where carriers are innovating to shape the virtual mobile landscape of tomorrow.

When the MVNO model was first launched on the US cellular sector in the middle of the last decade, it was with high hopes that it would deliver a useful shot in the arm to the market.

The expectation was that licensed operators would use their MVNO partners to penetrate difficult niches of a complex market, along the lines of successful European examples. These early hopes were not realised, and many early virtual initiatives crashed and burned.

But a fresh wave of MVNOs is succeeding where the vanguard failed, backed by new thinking among US carriers and a new generation of supporting technology.

According to GSMA Intelligence – the research arm of the GSM Association – of the approximately 335 million mobile connections in the US, some 34 million are now serviced through MVNOs, or about one in 10 of all mobile links. The GSMA further calculates that, between them, US MVNOs have grown the total number of mobile connections in the country by upwards of 4% in the last two years. They are not just grabbing share, but starting to steer the ship.

“It’s heated up again,” agrees Todd Bricker, principal with Boston-based management consultancy CSMG. “You could call it MVNO 2.0, with a number of new business models emerging.”

Sprinting ahead

The MVNO opportunity is one that all the big players are angling for a stake in – AT&T, T-Mobile, Sprint, Verizon Wireless, US Cellular, and Clearwire.

But it is the first three of these names that have so far made the biggest inroads. According to GSMA Intelligence, the MVNO partners of AT&T, T-Mobile and Sprint between them account for 23 million connections, or close to two thirds of the overall market.

Sprint is the acknowledged pacesetter, and has achieved its lead by taking an innovative approach to its MVNO channel model, one that allows for huge variety in the type of partnerships being signed. It has also done its bit to help slim down the heavy debt burden that stymied so many early MVNO ventures.

The vigour with which Sprint has attacked the MVNO sector in the past two years has resulted in a large portfolio of partners, each with its own unique take on the market.

Zact, by way of example, went live this May, offering consumers an unprecedented ability to finely tailor their own mobile plans for particular types of data and usage. This was followed by GIV Mobile, which gives customers a choice of non-profit charities to donate 8% of their bill to. Five new Sprint-backed MVNOs are poised for launch, each targeting soldiers and veterans of different branches of the US armed forces.

Before Sprint unleashes new MVNO competition on the market, important considerations must be met. It is not a matter of “anything goes”, says Karen Freitag, VP emerging and wholesale solutions at Sprint.

“Any potential MVNO has got to define its niche, and decide exactly what they are going to target,” she says. “Where once an MVNO might just say ‘We’re offering a service’ and hope to be successful, now they need to examine how to achieve that success. We have a lot of discussions with potential MVNOs before we go to market. What channels are they using? What’s their focus? What’s their differentiation?”

Another level

There are now three levels of partnership to choose from, starting with the Standard Enablement Model, where the MVNO has full control of all operations and Sprint merely provides the network. Then there’s the Joint Enablement Model, where Sprint takes on some of the more complex elements, like billing. Finally, there is the Single Source Enablement Model, where Sprint throws in all the elements and the MVNO simply takes its brand to market.

“Wholesale for us is not just a way to sell excess capacity,” says Freitag. “It’s a strategic part of our business, one where we need to keep innovating. We have the lead here. We want now to drive the market beyond the obvious voice and text services and more towards data. We’re already seeing some data-only MVNOs, and I’m certain there will be more.”

She says that Sprint has made a virtue of its focus on the prepaid side of the MVNO market, and also set itself apart from other MNOs by offering the whole of its services suite, right up to 4G, to MVNO partners.

“I think there are still untapped opportunities in North America, if you look at what’s been achieved with the MVNO model globally,” she adds. “Certainly the traditional MNO model is near saturation – anyone can see that.”

Bricker of CSMG believes that Sprint has succeeded not just by tweaking the commercial side of its offer to appeal to a range of partners, but by empowering its MVNOs with new technology too.

“It has shown with Zact, where customers are able to define their own plans, that the MVNO model can benefit from Big Data analysis,” he says. “The basis of a successful MVNO business is going after a highly specific user segment that a regular MNO is not able to pursue easily. It’s obviously a big help to have information on that segment, but today’s Big Data analytic techniques let MVNOs go further and combine various data sources from many different third parties – maybe Twitter, or maybe Experian – and learn a whole lot more about customers.”

Bricker believes this harnessing of Big Data to de-risk market niches is still very much in its early stages.

“One day there might be a standardised analytics platform developed by MNOs for their MVNOs,” he speculates. “It’s all so early that whoever chases here will get an advantage. Sprint has led, but is under pressure from AT&T and T-Mobile,” he says.

T-Mobile has to date been slower than Sprint to tackle the MVNO opportunity, says Ceri Tinine, a manager with the Analysys Mason consultancy.

“It might be simply that it has had issues with its network, and doesn’t have a lot of spare capacity to offer anyone else,” she says. She believes that AT&T has also yet to fully show its hand, but that the main factor in its case might be cultural rather than technical.

“It would make sense for AT&T to have more partners at the low end of the market, as they are generally focussed on the premium end,” she says. “But we’ve not seen much of that, yet. Verizon could be doing a lot more here, and have not been particularly proactive so far.”

M2M and MVNO

Innovation may be one of the keys that can unlock the MVNO treasure chest, but it is not the only one if the example of the US’s biggest MVNO – TracFone Wireless – is anything to go by.

Owned by multinational América Móvil, TracFone trades under a number of sub-brands like Straight Talk, Telcel América, Net10, SafeLink and SIMPLE Mobile. It operates as an MVNO for all four major cellular carriers – AT&T, Verizon, Sprint and T-Mobile. Yet its basic business model is simplicity itself – cut-price services aimed at the US’s Hispanic community, with few frills, bells or whistles.

Looking for potential openings for further MVNO-related growth has led a number of operators to thematically link the M2M and MVNO wholesale models in their strategising. There is logic in this juxtaposition. Both MVNO and M2M play an important role in boosting mobile operators’ market gains, while helping to offset slow growth in traditional service areas. But there is sometimes a closer overlap than that.

“M2M requires connectivity, in particular broad connectivity across wide spaces,” says Bricker. “There are a lot of types of device out there which rely for their connectivity on MVNOs, or network aggregators at least who are acting as MVNOs. Devices like e-books, connected cars or smart watches need connectivity, but consumers don’t care who with – not like they do with a phone.”

Both Verizon Wireless and AT&T have made inroads into the M2M market using a variant on the MVNO model, tackling sectors like automotive manufacture and home security, and helping to monetise their wireless networks in completely new ways while offsetting declining margins from conventional connections.

As the MVNO model gains credibility and acceptability across the US, so it is making some gains in other parts of North America. Mexico’s cellcos are preparing their networks for potential MVNO launches over the next year, says Tinine of Analysys Mason.

Canada’s mobile market is another likely battleground, but being only a tenth of the size of the US market creates an MVNO challenge, since it is a model that inherently benefits from size and scale. What Canada lacks in sheer size is made up for to a degree by its variety of ethnic communities, each a fertile opportunity for a well-tuned MVNO offer.

Nobody should see the MVNO sector across North America as an open goal, a free lunch for anyone who shows up with a half-cooked idea. It is now a very competitive sector, often with more than one venture targeting exactly the same niche.

The brash confidence of eight years ago has been tamed and tempered. Nobody now believes they are going to revolutionise the US cellular market in a short period of time. Instead, the focus is on mining the gaps where MNO prices and practices do not reach. Today’s successful MVNO ventures are about being nimble, lightweight and cleverly focused. They are also likely to enjoy the proactive backing of a wholesale carrier partner keen to sidestep the expensive errors of yesterday. 


Total MVNO and M2M connections for AT&T, T-Mobile, Sprint, US Cellular, Clearwire and Verizon Wireless:

Q2 2010: 40 million

Q2 2013: 70 million

Source: GSMA Intelligence

Of all wholesale connections across AT&T, Sprint and T-Mobile US, the proportion represented by MVNO and M2M as of Q2 2013:


Source: GSMA Intelligence

Global cellular connections for MVNO model by 2015:


Proportion of global MVNO subscribers that were US-based in 2010: 


Source: Pyramid

Forecast for annual enterprise MVNO revenue from North America:

From $90m in 2011 to $120m in 2016

Forecast for annual enterprise MVNO revenue from Western Europe:

From $55m in 2011 to $66m in 2016

Source: Pyramid

Projected growth in MVNO model’s share of overall US cellular market between 2010 and 2016:


Source: Pyramid

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