Mobile Virtual Network Operators are a growing slice of the mobile pie, and are predicted to penetrate ethnic markets, as well as young and senior demographics.
Both brands and wireless operators have a profound vested interest in the eventual success of MVNOs, or Mobile Virtual Network Operators, as mobile competition shifts its focus from growing market share to growing wallet share.
A MVNO is simply any organization that leases network capacity from an incumbent mobile operator. The objective is to offer a branded mobile telecom and data service to a target market without actually becoming a wireless service provider.
Many observers have noted that the number of MVNO subscribers is miniscule compared to the overall global market for mobile telecom services. However, even a small fraction of such a vast ocean can be a huge business. According to a June 2006 report by PricewaterhouseCoopers, the number of worldwide mobile phone subscribers will reach close to three billion by 2010.
The incumbent U.S. operators (Cingular, Verizon Wireless, Sprint Nextel, T-Mobile) have seen steadily declining ARPU for voice services as they try to grow their wireless data ARPU. In November 2005, eMarketer sketched the voice and data ARPU shifts over time for the big four incumbent operators. On average, voice ARPU declined by 3.6 percent between 2004 and 2005, a trend that seems to be holding for 2005 and 2006 as well.
As Americans talk more, the average price for a minute of voice service continues to decline. Consequently, all carriers are moving aggressively to increase the rate of data ARPU. According to an M:Metrics survey completed in July 2006, Americans are moving past the toe-dipping stage of using mobile data toward more general adoption. Over one-third of all U.S. mobile subscribers reported that they sent a text message during a three-month period while 11 percent included photos with their message.
The U.S. is seen as one of the most important global MVNO markets because it is not yet saturated, as is the case in most Western European markets. Hence, the idea of using MVNOs to penetrate some of the remaining consumer demographics such as ethnic markets (eg, Asian, Hispanic) and more tightly defined usage markets (eg, kids, seniors) still appeals.
In May 2005, Yankee Group published a list of 15 MVNOs that were launched or planned for launch in the United States. With the exception of AT&T's MVNO, which ceased to be after SBC acquired AT&T, all of those listed by Yankee Group as planned have been launched.
eMarketer projects that the U.S. MVNO market at the end of 2006 will include about 18.3 million subscribers, which works out to about eight percent penetration of a projected total U.S. mobile market of 228.7 million subscribers. These MVNO subscribers should generate $9.7 billion, or $44 per month of total (voice and data) ARPU. By 2010, eMarketer forecasts that U.S. MVNOs will achieve something like 12 percent market penetration, have 36 million subscribers and generate just over $17 billion in total revenues. These projections assume that the present MVNO business model will still dominate.
Currently, the U.S. MVNO market is dominated by three main players (Virgin Mobile, Tracfone and Boost Mobile), which together account for about 65 percent of the total number of subscribers. It is notable that all three of these virtual operators are pre-paid for the most part, although Virgin Mobile and Boost Mobile have now introduced monthly billing plans.
John Gauntt is a senior analyst at eMarketer. This report was drawn from his recent report, Mobile Virtual Network Operators: Mid-Life Crisis or Growing Pains? Contact eMareketer directly.