Of the 15 or so mobile virtual network operators, or MVNOs, entering the market in 2006, at least 40% will fail, and 10% will seriously underperform against expectations. Successful new MVNOs, whatever their focus, will both accelerate the global phenomenon of the “hyper-segmented market” and drive much-needed product and marketing innovation within the U.S. market.

Based on our support for more than 25 MVNOs, we have outlined the top 10 success factors essential to MVNO success:

• Pick the right leader

  Successful MVNOs leverage a telecom expert enabled by ‘core’ business executives, and not the other way around. Wireless has fundamental technical, economic and operational complexities, which an effective leader must thoroughly and inherently understand.

• Know the target segment

  Most new MVNOs think they understand their target segment but don't translate those needs into telecom fundamentals. Understanding how ‘segment needs’ affect telecom usage, execution of new wireless services or partner selection is critical.

• Remember the asset-light strategy

  One of the foundations of MVNO theory is that a third party with some key point of differentiation seeks to leverage someone else's capex and fixed investments. Too many MVNOs are forgetting that, to ensure sustainability, they must avoid fixed-cost outlays.

• Secure a win-win MVNO contract

  Recent due diligence of existing contracts for investors and other third parties has shown significant variability in terms and conditions, often from the same carrier. There are certain proven techniques when securing a healthy contract — most important is to ensure a win-win fit with the host carrier.

• Understand wireless economics

  MVNOs entering the 2006 market with “me-too” products without an economic advantage will fail. How many more Hispanic MVNOs can offer Latin content and discounted long-distance to Mexico? It is vital to ensure that the MVNO will do something different — that it will have lower cost per gross add and churn or drive higher ARPU. Successful MVNOs are ones that alter existing wireless economics.

• Define your point of differentiation

  We are seeing the emergence of duplicate MVNOs with little or no customer-valued differentiation between them. Successful MVNOs drive a sustainable point of differentiation.

• Select world-class partners

  In the rush to get to market, MVNOs are not doing their due diligence on vendors, particularly on mobile virtual network enablers, or MVNEs. Upon completion of written and on-site MVNE due diligence, we are often shocked at the lack of true integration between the MVNE and its solution vendors and at the variability in pricing. MVNOs are often delaying launch because of poor MVNE selection.

• Keep things simple

  Remember, the handset can intoxicate. While attractive to MVNO management, the cost of developing a new handset can only stress MVNO economics for marginal benefit. It can also delay launch. Handset differentiation should take place at the user interface level, not at the radio level.

• Avoid ‘standard’ wireless distribution channels

  The best MVNOs leverage distinct channels, invariably cheaper and more targeted, to serve their customers. Standard channels — a la Best Buy — are a problem. MVNOs with a new distribution channel are, more often than not, successful.

• Prepare for convergence and the triple-play market

  The success of a wireless-only strategy is not necessarily guaranteed. New MVNOs must consider how their strategies can evolve over time to include converged triple-play products.

MVNOs that ignore these lessons, learned from five years of supporting new MVNOs, will fail. Our most successful MVNO clients live by most, if not all, of these key success factors. Whatever your view, we wish you well on your journey.

Andrew Cole has supported 25 MVNOs across three continents over five years, including Disney and Helio. He is the president of CSMG, the management consulting division of TMNG. Cole can be reached at (617) 943-2367 or Andrew.Cole@tmng.com

Related Pages

MVNO Resource Page

How to be an MVNO