Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

MVNOs seek to differentiate, but not all will survive: analyst

Stephanie McDonald | May 2, 2013
Increased competition in the market has had an impact on MVNOs margins, according to Live Connected founder Roshan Mahanama

Competition among telecommunications resellers -- known as mobile virtual network operators (MVNOs) -- is heating up.

With more than 40 companies now offering access to the networks of Telstra, Optus and Vodafone, MVNOs say that margins are thin as companies focus on competing on price.

With Telstra announcing wholesale access to its 3G in November, analyst firm Telsyte expects more to join the number one telco's network.

Boost Mobile was the first to jump on board Telstra's Next G network, following more than 12 years on the Optus network. The announcement was so popular the MVNO's website server was overwhelmed by a traffic spike.

Aldi and Kogan now also offer services on Telstra's 3G network.

"The MVNOs see that Telstra is a well-engineered network that will provide their end customers with good service," says independent telco analyst Chris Coughlan.

"Whether that continues largely depends on Telstra's ability to continue to build capacity to meet the growing demand for mobile services and mobile broadband."

Rolf Hansen, CEO at MVNO Amaysim, says growth in the market is being driven by MVNOs providing alternatives to lock-in 24-month contracts, with the industry shifting towards bring-your-own mobile offerings.

"[Providers] basically have to give away an iPhone for free and then hope to recoup that money with inflated mobile minute rates over 24 months," he says.

"It makes a lot of sense for the industry as a whole and over the next couple of years the industry will have to cut out fat and save costs and reinvent itself with regards to how they acquire customers and how they retain customers."

This increased competition in the market has had an impact on MVNO margins, which are "extremely skinny" according to Roshan Mahanama, founder of Live Connected.

Mahanama says it is becoming harder for MVNOs to differentiate themselves from other telcos, with many competing on price point alone. This is prompting some MVNOs to offer alternatives to standard prepaid offerings.

Live Connected recently announced a trial for 'sliding plans' where customers who exceed their talk or data limits are automatically moved up to a higher tier plan for the rest of the month. At the end of the month, the company restores the customer to their original plan.

"Will we see other MVNOs jump on this straight away? Probably not. They'll probably wait and see how it works and try to get their head around the economics of this plan," Mahanama says.

He plans to take a business case back to Optus to gain support for the plan on a permanent basis, citing supplier power restricting what Live Connected can offer.

 

1  2  Next Page 

Sign up for CIO Asia eNewsletters.