Turn Matchmakers with ‘MVNO in a Box’
By Khali Henderson
THE MARRIAGE OF WIRELESS CARRIERS
with consumer brands in a resale bond has been slow to take off in the Untied
States. The so-called mobile virtual network operator (MVNO) model is suffering
from a wait-and-see attitude — especially on the part of U.S. carriers.
What are they waiting for? The
results of the first U.S. MVNO pairing between Sprint PCS and Virgin Mobile to
form Virgin Mobile USA, which consummated Oct. 5, 2001.
The company launched service in two
markets in June and planned a full rollout in August. Forrester Research Inc.
analyst Charles S. Golvin says the MVNO "has all the trappings for
success." Among these are laser-like youth focus, simple service plans and
a profit-driven prepaid infrastucture that assumes average revenue per user (ARPU)
of $25 per month. Nevertheless, Virgin’s success in other markets has been
decidedly mixed. It has 1.8 million subscribers in the United Kingdom after
having added 171,000 in second quarter, but in July shut down its venture with
Singapore Telecommunications Ltd. (URL) after having gained only 30,000
customers since it opened in October.
Ken Hyers, a senior analyst for
Cahners-Instat says, Virgin Mobile USA is underfunded and the Virgin Group is
working to reduce its exposure by closing unprofitable operations. "The
crucial test for [Virgin Mobile USA]," he says, "will be whether it
can add enough customers in the fourth quarter of 2002, the busiest time of year
for U.S. wireless carriers, to justify continued operation."
If that weren’t enough reason for
cold feet, there is another: An MVNO relationship is much more than signing a
contract. It involves integrating systems and processes so the end customer is
billed and served seamlessly.
To ease the pre-deal jitters, a new
breed of enablement solutions has emerged to provide turnkey technology and
services platforms specifically for MVNOs. Sentori, an eight-year-old billing
and customer care vendor, launched in 1998 its Sentori Solution for "easy,
fast, cheap" deployment and do-it-yourself management of provisioning,
rating, billing and customers care, says Dave Dague, vice president of marketing
for Sentori. It has been tapped by an undisclosed wireless carrier as it vendor
of reference for private-branded wholesale customers. The Sentori Solution
integrates with the host carrier network (at the switch or billing system) and
then interfaces on behalf of the MVNO with all the required third-party
providers, such as the call center, bill printer, bank, credit card
clearinghouse, handset fulfillment company, etc. (see diagram bottom left).
Similarly, a new company, Visage
Mobile, was founded in the spring of 2001. Its "MVNO-in-a-box" allows
a carrier to host multiple MVNOs with a single integration effort by customizing
its systems to the Visage Platform (see diagram below). On the other side of the
aisle, it allows the MVNO — a nontelco company — to outsource the costs and
complexities of operating a wireless service company.
"The key challenge for MVNOs is
the ‘telephoneness’ of it," says Tom Bobich, vice president of marketing
and product development for Visage Mobile. He explains they have to invest in
billing and customer care systems, for example. As an alternative, Visage
provides expertise and guidance in crafting a wireless service offering,
delivering back-room services (customer care, billing, activation, content/media
services) and handling network switching, number provisioning and
roaming/interconnect issues. He says the firm even may handle the customization,
inventory and distribution of the handsets. The MVNO focuses on branding,
distribution and customer acquisition.
Sentori and Visage Mobile are
seeking relationships with both carriers and brands. "Rather than wait for
someone to knock on Verizon’s door, we are proactive in developing relationships
with brands," says Bobich.
Bobich says at present there is more
interest from the brands than the carriers. He says Visage Mobile is working
with a number of brands and at least one carrier he declined to name. He expects
the carrier soon to be announced, with its first MVNO debuting in early 2003.
"In a year or two, there will
be a dozen brands that are MVNOs," Bobich predicts. He expects some brands
will be data-oriented like a Yahoo! while others, such as a Disney or an MTV,
will focus on demographic niches, such as family or youth, respectively. Still
others will be vertical in nature, such as Home Depot.
The Yankee Group analyst Paul Hughes
agrees. "These carriers will likely offer similar services but with even
more unique branding messages that can attract either customers who have not
subscribed to a wireless service, or those customers interested in switching to
an operator that fits their needs and beliefs, " he notes.
In addition to well-known retailers,
The Yankee Group expects to see more niche-focused organizations become MVNOs.
"These entrants have strong customer loyalty bonds because their
relationships are built on common affinity or a unique sales and distribution
channel," Hughes says. The ties lie outside basic financial contracts and,
thus, mitigate price-sensitivity of typical wireless customers, he adds.
Sentori already has a relationship
with one unnamed carrier and two of its MVNOs that fit into this niche category:
Working Assets and Excel Communications Inc. Both are using a service bureau
model, but Working Assets’ Sentori platform is deployed at the EUR Systems while
Sentori hosts the system for Excel. Sentori is targeting other groups in this
subcategory, including ethnic marketers, universities, sports franchises and
Regardless of the MVNO’s
"brand-width," the nature of the close MVNO-customer relationship
dictates that the MVNO maintain control over how it interacts with customers,
says Hughes, noting that means managing billing and customer care priorities and
The Yankee Group says outsourcing
can be a good option for MVNOs, especially in the early stages, since they may
not have billing domain expertise. Smaller MVNOs will have a greater propensity
to outsource for quicker time to market and lower upfront costs, it asserts.
Visage and Sentori are peddling both
those themes to MVNOs. Visage, for example, expects a standalone MVNO will spend
between $245 million and $310 million to get to market, while Visage customers
will spend $15 million to $25 million (see chart at left) Sentori’s platform
license runs $400,000 to $800,000 plus 20 percent for professional services
fees, but on a hosted basis, which MVNOs typically choose, it’s about 15 percent
to 25 percent of the equivalent license cost for the setup fee plus a monthly
subscription, says Dague. Entry-level fees are $20,000 to 30,000 per month, he
Dague says, in addition to having a
low entry cost and speed to market, MVNOs will require an integrated customer
management system that eliminates manual processes, thus taking the costs and
expertise requirements out of the proposition.
MVNO in a Box
Source: Visage Mobile
Sentori Solution: How It Works
Potential Cost Savings from Outsourcing
Source: Visage Mobile