Jan 2009: MVNO’s: Turning the 'Virtual' into Tangible Profits

Some of the most successful business people throughout history haven’t needed a greenfield opportunity to thrive. Instead, they’ve taken an existing market, approached it in an original way and carved out their own path to success.

For telecommunications – and mobile services in particular – one of the biggest opportunities lies in exploiting one of the most natural characteristics of phone users: most of their calls are made to relatively small and usually pretty consistent groups of other users grouped around communities, shared interests and ties of family, location, language or ethnicity. While the big multinational operators focus on mass market branding and often cutting-edge consumer or business services, hard evidence is now emerging that highly profitable businesses can be based on tightly controlled niche markets – and with a minimal up-front investment.

Mobile Virtual Network Operators (MVNOs) - as they’re now known - have grown in the last few years to represent a market that could be worth as much as €6 billion in Europe alone by 2012. Like most good business ideas, the core concept is simple. An incumbent national or international mobile network owner effectively leases out capacity on their network to a ‘virtual’ operator along with varying aspects of back-office functionality. The MVNO in turn handles their own marketing, branding, billing and customer relationship management, buying national and international connectivity at low market rates.

For the customer, this can translate into much cheaper calling costs, especially where international calls are regularly made to family, friends or business colleagues in other countries. Additionally, the use of ethnic, local or language-specific promotions can rapidly drive up customer loyalty while native language customer helpdesks increase both service stickiness and support word-of-mouth promotion.

The MVNO Platform

It’s important though for any MVNO to make sure that they have their own optimum service platform in place if they’re to fully exploit these opportunities and remain commercially and operationally agile, yet financially secure.

Some of the issues that they must address – which DIGITALK already has direct experience of with a number of existing customers – include ensuring that they can consistently apply routing rules to achieve least-cost connectivity; highly flexible and dynamic tariffing and real time charging functions to eliminate fraud; a range of web, IVR and SMS tools to interact with the customer and allow them to control their own balances and service profiles; and a means for customers to access voicemail from different devices.

Companies looking to set up as an MVNO need to make sure that their platform supplier can fulfil a number of vital attributes:

Is the platform capable of ensuring appropriate least cost routing rules are applied to maximise profitability?

Does the platform give the MVNO a sufficiently transparent view of usage, revenues and capacity for management purposes?

With the chill winds of a recession blowing around the world at present, the attractiveness of offering economic services to niche international markets can only grow in importance as both migrants and immigrants seek to save the pennies. With the right platform in place, ethnic MVNOs are well placed to thrive even in difficult times. DIGITALK has the technology – it’s up to our customers to find their chosen market to target.

Justin Norris
Chief Executive Officer