MVNO Business Model: Balancing Telecom Revenues with Cross-selling Core Services

The more traditional objective, has been to generate revenue from telecoms services, with MVNOs launching purely to capture a share of the voice, data, SMS market.

Many of the early MVNOs focused on providing services similar to the traditional mobile operators albeit at lower prices. However the focus trend today is more towards offering bundle service, and targeting specific niche segments.

Below are examples of MVNOs operating their businesses mainly on generating revenue from selling telecoms services (voice, data, SMS), and other telecom related services or products.

Table 1: Generate Telecoms Revenues – E.g. MVNO Lebara, MVNO Penguin, MVNO Circles Life

The second, and increasingly more common objective, is using MVNO as channel to up sell or cross-sell from the company’s existing core business, often seen as the choice for brands, having an existing user base and/or distribution channels.

In Table 2 below, are three examples of companies operating as MVNOs with a focus on up-selling, or cross-selling services or products from its existing business, while still maintaining a fair business on telecom services.

Table 2: Up-sell / Cross sell core business – E.g. MVNO Tune Talk, MVNO Snail Mobile, MVNO Woolworths.

Some MVNOs have started out with one objective, and then moved to the other, or kept a foot in each.

In example, the Chinese MVNO Snail Mobile, is a prime example of adapting to opportunities. The wholesale market in China does not provide enough margin to launch a MVNO purely on generating telecoms revenue, as the wholesale rates from the MNO’s is the same as the retail price.

As a result, Snail Mobile chose to uplift its parent company Suzhou Snail Digital Technology, better known as Snail Games – a global provider of online games. At the end of 2017, Snail Mobile announced it had achieved 11 million subscribers.

However with the increasing amount of Chinese tourist visiting the APAC region (8.73 million Chinese tourists visited Thailand in the first nine month of 2018) Snail Mobile also moved into generating telecoms revenue by selling local Thai SIMs to the Chinese tourists visiting Thailand.

You can say that the some of the successful ethnic MVNOs, also have moved into a combination of the above objectives. While still making revenue on voice/data, MVNOs like Lycamobile, Vectone and Lebara are no longer just selling telecom service but cross selling money transfer service, insurance and entertainment with content from the subscribers home country.

There are a couple of reason why cross-selling cores business is increasing and telecoms revenue stream is decreasing.

In markets where connectivity has reached saturation point and slowly becoming a commodity, the traditional mobile operators are fighting the only way they know how, and that is to lower the prices, or subsidizing handsets on contracts, creating a price war in the market and lower ARPU – making pure telecoms revenue streams less attractive.

As we move more into the digital transformation, we will continue to see more industry specific MVNOs targeting Internet of Things (IoT) and machine to machine (M2M). The increasing growth of IoT and M2M services, is also taking a toll on the telecoms revenue stream as many of these services aren’t necessarily heavy users of data. Instead new business models, which rely on cross-selling core business products or service are introduced.

Artificial Intelligence (AI) and Machine Learning (ML) with data analytics, provides the MVNOs with a holistic view of their customers lifestyle (their Needs, Wants, Nice to Haves) and thus an opportunity to supply this demand beyond telecom services.

Chart 1: Change in MVNO Revenue Stream from Telecoms Revenue to Cross-sell Core Business.

The up-sell/cross-sell objective, has also provided us with a new batch of MVNO entries recently, from giants in the likes of Google, Alibaba, Foxconn, Panasonic, Lenovo, Haier, Xiaomi, etc. who has entered the MVNO sphere, only using voice, and data as a transport, to provide their own services and products.

In example, when you buy a Panasonic freezer, microwave, or other device that needs Internet access, it comes loaded with a Panasonic SIM (e-SIM), and ready to use out-of-the-box, so the customer does not have to shop around with third parties to figure out which mobile operator to use for the SIM.

Similarly, should a problem arise the customer does not have to guess, if the problem is with the device, or related to connectivity (mobile operator) they just contact Panasonic.

Doing so, the customer journey, experience, and usage data stays with Panasonic, who can use this data to customize and optimize their products and offers, based directly on its customers usage.