What Does This Imply for Other MVNOs?
The MVNO model is not attractive–especially in the US market–and content as a cost-lever is not enough to sustain a business model says Pyramid Research’s latest Analyst Insight, in light of last week’s announcement that Disney is pulling the plug on Mobile ESPN.
“We have consistently argued that the MVNO model is less attractive than the hype would suggest,” comments Ozgur Aytar, Manager of Communications Media and Technology Research at Pyramid and author of the Insight.
Pyramid found the MVNO model is a reseller business; margins are thin and start-up costs can be high, depending on the model iteration. The Mobile ESPN case supports that and points out an even greater challenge–leveraging this model in the U.S. market.
“Offering compelling voice plans in a context where the cost of voice minutes has declined sharply; MVNOs cannot keep up, as they have to pay the MNO for each minute of traffic used, whether or not the user pays for it,” continues Aytar.
Pyramid found that there may be ways around this challenge, from free minutes offered to specific number to fixed mobile convergence using Wi-Fi, but those have yet to be proven.
“MVNOs will lose money for 2-3 years before they reach profitability; shareholders just need to ensure they are ready to support those initial losses,” concludes Aytar.
If you would like to read more of Pyramid’s analysis of the Mobile ESPN case, please download this Analyst Insight by Manager of CMT, Ozgur Aytar at: http://www.pyr.com/downloads.htm?id=6?sc=10.03PR
About Pyramid Research
For twenty years, Pyramid Research has helped companies in the converging communications, media and technology industries stay ahead of market trends, understand competitive threats and capitalize on opportunities. We advise the world’s leading vendors, service providers, equipment manufacturers, and the financial community on how to implement best practices, build offensive growth strategies and drive profitability.