NOVANEWS

Why MVNOs Succeed and Why They Fail
By Andrew R White

The mobile telecommunications industry has been one of the most phenomenal growth stories of the last 20 years. Individuals have made fortunes from the business, particular those close to customer, for example Charles Dunstone and Car Phone Warehouse, or John Cauldwell and SinglePoint / Phones4U. Many believe that the next wave of individuals who make their fortune from the mobile telecommunications industry will be those who found successful mobile virtual network operators (MVNO), following in the footsteps of Richard Branson and Virgin Mobile.

However in my 25 years working in the telecommunications industry and particularly the last 8 years working in the MVNO sector, I have seen many more failures than successes. When I reflect on these failures, the causes of failure seem to be grouped into five categories:

Market failure

In such cases customers did not buy the service. Or in other words, the proposition wasn't as meaningful to the target consumers as the management team thought. Sometimes this type of failure could be due to a flawed business model. An example of this type of failure is Blyk, whose innovative business model (to attract students by getting advertisers to pay for free airtime) failed because Blyk couldn't build the critical mass of advertisers required to fund the airtime costs. Often this type of failure is due to poor proposition development and marketing. Or even worse, a single minded visionary with a misguided vision.

Systems failure

In this type of failure the product or service simply doesn't work properly, or even worse, the service works fine but the billing system doesn't collect revenues correctly. Often, in my experience, this is a failure in strong programme management. It's rumoured that USA MVNO AMP'd failed to collect monthly bills from 50% of its 175,000 customers. Often such failures quickly become target for fraud.

Service failure

Historically it has been commonplace for mobile telecommunications services to fail below customer's expectations. However this more often the case with new entrant MVNOs, attempting to align their new business processes with those of mature competitors. Once again, in my experience this type of failure is due to poor Programme management.

Profitability failure

This type of failure is caused by a situation where the host mobile operator is not motivated to encourage the MVNOs it hosts to be successful. Such situations often arise in markets where the mobile operator has been 'forced' by the regulator to support MVNOs. It's even worse where the country has a relatively small subscriber base. My view is that many MVNOs in middle eastern countries face the real danger of failure through lack of profitability.

Business structure failure

This is broad category of failures, but includes the inability to launch or run the business, investor loss of interest, under capitalisation of the business, organisational incompetence, etc.

The sixth category of failure, that no MVNO has yet publicly cited, is failure through fraud. This may not strike you as a realistic cause of failure, however in my experience weaknesses in telecommunication billing systems are rapidly exploited.

Of course most failures are a combination of events. It has also been my observations that those MVNOs who master the balance of spending just the right amount of money on the right things have been much more successful than those who have invested hundreds of millions of dollars for zero return.

You can reduce your risk of failure by using skilled MVNO consultants with real life experience of both successful and less-successful MVNOs.

(c) Andrew White 2014. Reproduction permitted provide no changes and links remain intact. All rights reserved internationally.

Andrew White has over 20 years experience in the international telecommunications industry, including as Chief Strategy Officer of a listed mobile operator (carrier) with a market capitalisation in excess of $3b and over 9 million customers.

Andrew has a Masters degree in Electronic Engineering from the University of Surrey, England. And a MBA from the London Business School. He was elected a Fellow of the Institute of Engineering & Technology (FIET) and Fellow of the Institute of Marketing (FCIM).

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