By Elena Bisogni and Elizabeth D. Bailey
September 2006
 |
Although the credit card in your wallet comes ultimately from a financial institution, the distinctive logo emblazoned on the front may belong to an entirely different organization: a gasoline company, perhaps, a retail store or even your alma mater. Likewise, the name on your mobile phone—and the brand identity associated with sales, marketing and customer care—may actually be that of a company that has little to do with telecommunications. The Virgin Group, The Walt Disney Company, ESPN—these companies and many more are now reshaping the wireless industry as mobile virtual network operators, or MVNOs.
|
An MVNO is a company that owns neither any part of the mobile communications spectrum nor its own network infrastructure but instead applies its brand value and customer management cap-abilities to create a wireless company. As a virtual provider of mobile services, the enterprise leases excess network capacity from a traditional mobile operator and sells it to its own customers.
Europe has led the MVNO market during the past half-decade or so, but the marketplace in the United States is now surging as well. Although there have been some high-profile failures in the Asia Pacific region, new Asian MVNOs are likely to continue entering the field as well. How hot are MVNOs? One major carrier reports that in the last year alone, it was approached by approximately 100 companies about potential MVNO initiatives. The appeal is clear: In the wireless industry, where the network itself is becoming a commodity, companies are now moving to differentiate themselves based on the services surrounding the network.
Some MVNOs are wireless resellers focusing primarily on providing distinctive voice and data services to particular segments of the marketplace. "Brand" MVNOs, on the other hand, try to capitalize on the value and power of their company name; putting that brand on ubiquitous mobile devices is a way to reach a new customer base, especially a younger one. A loyal customer of a Virgin or Disney virtual wireless operator is more likely to be a consumer of all the other products and services represented by that brand. Thus, launching an MVNO can be a critical part of a long-term brand and customer acquisition strategy.
Yet as the number of players in the mobile arena rises, so does the risk. It is unclear how many MVNOs any geographic market can support, but it seems certain that not every MVNO will survive long enough to turn a profit. Based on the experiences of a number of early adopters, those contemplating an MVNO strategy should bear in mind a number of success factors.
Focus On a Razor-Sharp Value Proposition
MVNOs exist only because of the changing value propositions of the mobile industry. As noted, the networks themselves are fast becoming utilities and commodities. Value now comes from the way a wireless provider targets customers and creates value for them.
MVNOs base their strategies either on targeting a part of the marketplace that is currently unserved or underserved or, alternatively, in the words of one wireless executive, by "hyper-serving" a segment of the population with an overwhelming value proposition that convinces consumers in that segment to switch from their current provider.
A highly targeted market focus and position, therefore, is key. TúYo Mobile—launched by US-based IDT Corporation, a provider of wholesale and retail telecommunications services—is an interesting example of an MVNO that knew its focus and kept that focus razor sharp, starting in the planning stage.
TúYo Mobile is a prepaid wireless service for the Hispanic market in the United States. (The brand name is a combination of the Spanish words for "you" and "me.") TúYo appeals to its targeted customer base (more than 42 million Hispanics, the largest minority in the United States) with low international calling rates from the United States to Mexico and South America. The company also offers other products, such as downloadable, Latino-oriented ring tones and graphics. With bilingual service agents ready to serve customers whose primary language is Spanish, the company knows its target customer segment and what those customers are looking for.
Other companies are targeting other kinds of customer values. For MVNOs whose value is in the wireless services themselves rather than in a well-known retail brand name, the players are pursuing well-defined segments. The prepaid market, made up of consumers for whom low price is the primary value in wireless services, has been particularly lucrative and, accordingly, has become a battle zone of competition, especially in Europe. About 60 percent of European mobile users are customers of prepaid or pay-as-you-go services, so players such as easyMobile are looking to grab a share of the "no-frills" wireless marketplace.
US-based Voce, by contrast, touts itself as a "luxury class" MVNO, with a flat fee of $500 per month and a new phone every four months. Companies such as Amp'd in the United States see themselves primarily as mobile entertainment companies, offering media and data services, and only secondarily as providers of voice services.
Two of the brand MVNOs, Disney and its subsidiary ESPN, hope to lure customers interested in family-oriented and sports content, respectively. Virgin Mobile is among the companies that have primarily targeted the youth market—a constituency that had previously been underserved and even, according to CEO Dan Schulman, "under-loved." (For more on Virgin Mobile, read an interview with Dan Schulman.
As several MVNOs have demonstrated, however, it actually is possible to get fairly far down the planning path before realizing that there is no consensus among critical decision makers and functional groups about what constitutes the value proposition for the virtual launch. And if a company does not know what the product is going to do or to whom it will appeal, it will launch without a clear and compelling reason for a customer to buy its service.
Concentrate On a Scalable, Low-Cost Launch
The time between an MVNO's launch and the commercial rollout of the service is usually very short: six to nine months, on average. This often puts a great deal of pressure on a young company's program management skills—tying together and coordinating all the activities that must be planned, tracked and measured. MVNO success is built, in part, on the effective management of third parties—an activity that can be challenging for even the most seasoned executives.
Keeping the launch cost as low as possible is critical to reaching profitability quickly. At the same time, the MVNO market is not a place to be testing a service or product through a bare-bones approach. MVNOs that compromise on quality will come out of the gate slowly and may never catch up. The best course is to release a certain set of high-quality capabilities that, from the beginning, deliver a good customer experience—focusing first, perhaps, on the prepaid market—and then scaling up over time.
|
Anticipate Your Systems Needs
Getting the underlying information systems in place—customer care, billing, service delivery platform and so forth—is so important for MVNO success that it can make or break a deal. Some potential entrants to the MVNO space(See Figure 1) have walked away after many months of due diligence. The companies have realized that although they might have a robust billing system in place for millions of subscribers, it could take them as long as two years—and a budget twice that for the rest of the MVNO launch—to fine-tune the system for the intricacies and demands of being a virtual wireless operator.
|
 |
MVNOs have at least a couple of options in seeking outside experience and assistance with the technology infrastructure and applications that can improve their chances for success. One is what is called a mobile virtual network enabler, or MVNE, which can provide turnkey solutions and/or fully integrated managed services for virtual operators covering end-to-end IT capabilities, solutions that the MVNOs are unable to provide. These include billing, CRM, accounts receivable and the service delivery platform.
A second option for MVNOs that want to create and operate their own IT and back-office functionality is to seek the support of integrators, especially during the period immediately before the launch. This kind of assistance can help the MVNO develop the back-office capabilities that can sustain long-term success.
That support was critical to NRJ mobile, for example, an MVNO that is majority owned by one of France's leading radio networks. The company started operations in February 2005 and launched commercial services in November. Because NRJ mobile decided to create and operate its own IT function, the company turned to an integrator (the French bank CM-CIC, with which NRJ has created NRJ mobile) to help it design its information systems along the entire customer relationship management chain: from opening and modifying accounts, to online self-service features and billing, to managing the interface with distributors. This support was key to meeting the aggressive and demanding timetable for the launch, enabling NRJ mobile to reduce its financial exposure and risk.
Customer Service is King
The leading MVNOs have been able to create a distinctive quality of customer service appropriate for their focused market segment. The value of the MVNO wireless service, remember, is no longer primarily in the phone and the connectivity but in the brand experience surrounding the possession and use of the phone. At Virgin Mobile, the goal is to have customer service mirror the brand attributes. There are no scripts for customer service people to follow, because that would eliminate the company's distinctive spontaneity. Even customers using automated self-service get a "very hip" experience, according to company executives.
Self-service technologies that can deliver a superior customer experience while keeping costs low are key to achieving high performance as an MVNO. From the beginning, NRJ mobile has invested a great deal in self-service capabilities, both through phone and web interfaces.
NRJ mobile has calculated, for example, that each customer call costs five euros. So the company has worked hard to set up simple self-service functionality that enables customers to quickly and easily manage their own accounts. NRJ mobile also has adapted the reloading of prepaid cards to customer preferences. New passwords, for example, can be activated through a scratch card at retail stores, by confirming a number stored on the company's web portal or by calling the service center.
Virgin Mobile has recently reengineered its self-service capabilities, especially its automated phone self-service functions. In many industries, these systems are notorious for alienating more customers than they help. Based on a comprehensive diagnosis of its existing capabilities, however, Virgin has put in place improved self-service capabilities that enable customers to perform more high-volume transactions (replenishing prepaid cards, for example) without assistance from a live operator.
Retail, media, entertainment and communications companies all view the MVNO marketplace as an opportunity to expand sales channels—and improve cross-selling and up-selling performance with an existing or new customer base—by delivering unique services and content directly to customers via a branded mobile device. The market beckons to these companies because it gives them a chance to leverage their existing assets, such as content or distribution channels, and increase the likelihood that the MVNO model will be profitable. Likewise, it appeals to wireline and cable companies as a way to leverage existing subscriber bases and add a wireless component to their service portfolios.
Meanwhile, the traditional mobile network providers are hardly standing still. As they see the rising popularity of low-cost MVNOs, many carriers are launching their own competing services. Indeed, one of the great unknowns in the MVNO marketplace is the extent to which these traditional carriers will continue to see their leasing revenues as adequate compensation for the loss of customers to MVNOs running on their networks.
Each type of MVNO player must overcome the unique challenges inherent in its business model. Retailers and entertainment companies do not become communications providers overnight. Likewise, communications companies do not start appealing to new generations of customers overnight. Whatever the industry, planning, launching and operating an MVNO requires companies to find, coordinate and deploy the best thinking and best operational capabilities they can. Many will be called to high performance in the MVNO marketplace, but fewer will be chosen.
About the authors
Elena Bisogni is a senior executive in the Accenture Communications, Media and Technology* industry group. Since 1995, Ms. Bisogni has consulted to wireline and wireless European telecommunications companies, working with these clients on business strategy, technological innovation, process reengineering and application architecture design. Recently, she has been working with the Accenture Wireless group on solutions for wireless carriers. Ms. Bisogni is based in Rome.
Elizabeth D. Bailey is a Seattle-based partner in the Accenture Communications, Media and Technology* industry group. Her work in this area includes both MVNOs and traditional carriers building out their MVNO and MVNE capabilities. Under her leadership, Ms. Bailey's teams have helped multiple MVNOs with their initial launches.
*formerly Communications & High Tech
Back to Contents
Return to Outlook Online main page
To Top