• MVNOs have diversified brands and business models that win the customers big network marketing can’t easily reach
• And they are doing their bit to grind out at least some growth in tough times
• As such, they’re playing a major role in telco/DSP realignment

There should be no mystery about why telecom is steadily seeing a rise in the number and variety of retail players and business models, whether hatched as independent mobile virtual network operators (MVNOs) or engineered as operator sub-brands.

Retail disaggregation and diversification is a direction that large and complex industries, with huge up-front capital costs, tend to migrate to over time, and that migration speeds up in times of trouble.

Take cars: If a major manufacturer finds its existing model range is faltering, one popular fix is to merge with a smaller rival or buy in a brand (or resuscitate an old one of its own) and put as much of its expensively developed and laboriously assembled new technology into it as it can, thus maintaining its technical edge while diversifying retail channels.

In telecom, this sort of fix has panned out in a slightly different way, but the underlying industrial logic is the same. “Over the years we’ve seen mobile virtual network operators (MVNOs) fall in and out of fashion, a few went on to be very successful while most disappeared, but we’re now seeing sustained MVNO growth,” said Kester Mann, director of consumer and connectivity at UK consultancy CCS Insight, which has recently completed a survey of UK MVNOs. 

The survey report, entitled UK’s Vibrant Market for MVNOs Keeps on Growing, found that MVNOs now represent 18% of all UK retail connections, having grown by 8% in 2023 by adding 1.2 million customers, while the big four UK network operators managed just 2% new customer growth over the same period.

Mann pointed out that the classic independent MVNO segment is actually part of a broader trend to retail diversification in mobile. He explained that operators have also moved heavily into sub-branding by establishing new entities that look to users like MVNOs but are actually fully or part-owned and operated by the parent network operator.

A sub-brand is usually split off from the parent in order to better appeal to specific demographics or interest groups through differentiated tariffs and often wildly different (Un-carrier style) marketing and imagery. In the UK, successful sub-brands include Giffgaff, Voxi and Smarty.

What changed?

Historically, UK industry observers would scratch their heads over why some MVNOs scored consistently higher on key network quality measures and general user regard than their ‘parent’ network operator, even though they were using the same network.

It soon became clear that network technical performance measurement wasn’t everything, especially as the number of dropped calls and other annoyances suffered by customers fell as the network technology and automated processes improved. Their technical scores all looked increasingly the same.

Instead, provider popularity increasingly stemmed from better overall user experience – so things like customer care, faster telephone response to complaints and a jazzier image often meant better customer retention and greater profitability.

There’s a similar story of MVNO progress in the US. For instance, T-Mobile appears to be making a major play to sign up as many MVNOs to its network as it can find. It has launched an initiative called “Your Name, Our Wireless”, which is designed to make it attractive to branded carriers considering a prepaid services launch. If hooked up to T-Mobile, the operator promises to foot nearly all of the considerable up-front and running investments to enable the business arrangement, claiming it will take on much of the burden, up to and including handling the back-end configuration, customer support and payment processing.

The lesson here is that once a big telco has made its own major investments in operations support systems/business support systems (OSS/BSS) and network automation, it can afford to extend the back-end services to its partners to win the market share.

- Ian Scales, Managing Editor, TelecomTV