Are the days of the full MVNO numbered?

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece, Darren King, Head of Business Development for Three’s wholesale division, assesses the future for MVNOs.

For as long as there have been MVNOs there has always been the received wisdom that a full MVNO was the best strategy to adopt. Having full control of your brand, the marketing and the technology is of great comfort when you are launching a new operator to market.

There are numerous examples that have stood the test of time. There are also the brands that have stretched out into countries all over the world, think Lycamobile for example.

One of the biggest reasons for going full MVNO has been the ability to switch wholesale partner easily to chase better commercials. However, the rate of change in our industry, particularly technological change, is bringing the tried and tested concepts into review.

That’s because to keep meeting customer expectations, you have to invest in the core network. It’s an expensive business, and it’s becoming even more expensive as the time between cycles of improvements shorten. There is no way of competing with the incumbents without a technology roadmap that keeps relative parity. It’s catch 22. If you want to keep growing your customer numbers and reduce churn you have to keep up the investment.

And that’s before we mention the challenges of managing, maintaining and improving UX.  One of the biggest challenges is getting the right settings onto handsets as the model has changed so much over the years. Traditionally all the settings needed to use a mobile service were stored in the SIM.  This is no longer the case, and there’s increasing reliance on settings being pre-populated in direct and market sourced devices across the board. This means that services like VoLTE, which make propositions stand out, can be difficult to deliver to customers.

There’s also something we refer to as the ‘blacklog’ conundrum.  As more consumers opt for SIMO and bring your own device, it becomes more complicated to get them access to newer services unless the MVNO can get retrospective updates. There are a heck of a lot of handsets out there so it’s no mean feat to pull it off!

Added to this, there’s the expectation to have a roaming proposition. This too is hurting MVNOs as they seek out roaming agreements and strike deals on interconnect charges. It requires full-time management and very often some form of partner hub to give you the scale that will sway customers to your brand and give commercially viable pricing.

There is no escaping the investment required. It’s brought into focus when you read the analyst firm Enders’ opinion on the Sky Full MVNO, which states the broadcaster will need around 3 million subscribers to break even in today’s climate.

It’s very easy to see why MVNOs and high street brands considering becoming an MVNO are saying ‘there has to be another way’.

And there is. We are now seeing MVNOs launch without these overheads and operational commitments. Instead, in our case, they are using a telecoms as a service model whereby the core network, billing and customer management tools, fraud detection, web front ends, existing roaming agreements, and the technology for proposition design and development of the operator are used lock stock, and the brand adds its sales and marketing expertise over the top.

In the case of our model, even the hardware challenges are reduced as the MVNO benefits from pre-populated settings that support MVNOs using a Three network profile. This means customers can use the devices straight away with no fuss.

It’s simplifying the MVNO model beyond recognition. In fact, in some ways you could argue it’s really bringing the word virtual to life in the phrase MVNO.

This radical partnership approach to MVNOs is shaking things up and allowing brands that have previously dismissed an MVNO to have a go with far more confidence than they otherwise would have. Superdrug is a perfect example. It’s used its loyalty card and understanding of its customers to develop a proposition that customers want and launched Superdrug Mobile at significantly lower risk and with extraordinary results.

It’s this success that leads me to predict that we’ll see and hear a lot more of the telecoms as a service model in the coming year, and in particular at MVNO World Congress. I’m certain it will be the early adopters of this model that will not only succeed in their launch market but outperform past records. For any brand considering how it will survive tough trading conditions, this has to be a very attractive way ahead.

Darren King, Head of Business Development for Three’s wholesale division. Darren is responsible for new Mobile Virtual Network Operator (MVNO), wholesale, and Internet of Things (IOT) commercial partnerships. Experienced at seeking new partnerships, whether through traditional MVNO’s or through White Label partnerships with the overall aim of doubling Three Wholesale’s customer base and revenue year on year to 2021.