The year of the MVNO

This year, a whole bunch of Mobile Virtual Network Operators (MVNOs) will launch their services. Among them are Merchantrade, Tune Talk, RedTone and Asia Telecoms. There may be more to come as MVNO seems to be the flavor of the year.

A few months ago, the CEO of a English newspaper group asked me for my views on a media company becoming an MVNO. I asked him "Why, are you considering it?" He replied the thought had crossed his mind, but he wasn't sure whether it's economically viable.

In reality, it's very hard to make an MVNO work because you're essentially leasing network capacity from the incumbents. As such, it's hard to compete on price, especially when the incumbent will always be able to beat your price since he's the one supplying you.

Yet, it's hard to compete on value-added services (VAS) as people who sign up for MVNO are typically pre-paid users, and pre-paid users don't consume VAS as much as post-paid users.

Not surprisingly, few MVNOs around the world have managed to make their business model work.