Feeds

MVNO bubble about to burst in the US?

New wave firms 'failed to learn lessons': analyst

Providing a secure and efficient Helpdesk

The much hyped bubble in MVNOs (Mobile Virtual Network Operators) in the US is close to bursting, according to new research from Strategy Analytics.

It has found that many of the best funded MVNOs have misunderstood their core target markets, and that, while the better established, youth oriented outfits like Virgin Mobile, Tracfone and Sprint Nextel's Boost have thrived, the new breed - such as EarthLink/SKT's Helio, Disney Mobile and Mobile ESPN - have adopted more ambitious business models but have failed to capture the consumers' imaginations.

The heavily marketed new entrants have "failed to learn lessons from their predecessors. The handsets are boring, pricing uninspired, and the distribution strategy is flawed. This is a threefold recipe for failure," writes Strategy Analytics' David Kerr.

At the end of 2005, Tracfone, Virgin and Boost accounted for 65 per cent of the US MVNO market, relying on the prepaid services that their youth audience prefers. The new wave does not look set to make much dent in this market share in 2006, and already all the big names have been forced to adapt their business models to put more emphasis on basic voice services and less on advanced data and multimedia options - which consumers may buy as extras, but do not want bundled into a standard price that then looks expensive.

For instance, Helio is appealing to the 102,600 users of its MySpace service by offering to drop its standard two-year contract requirement. However, the carrier is not promising discounts on its phones. Helio also recently added a lower priced, entry level calling plan and gave subscribers the ability to add a line to their account for $10 per month.

Recently, during Walt Disney's third quarter earnings call, CEO Bob Iger addressed analysts' concerns over the financial sustainability of ESPN Mobile, which it owns, and hinted the service may not continue as an MVNO.

"Our investment in 2006 was approximately $150m. We're not going to get specific at all about 2007. What we know is that ESPN works on the platform in that the product itself and the experience for the consumer is quite positive. So ESPN's presence in mobile platforms is a given into the future. Under what circumstance or in what model, it's really too soon to tell.

"The results, at least initially, even though it's only been six months, were disappointing and we're monitoring this carefully."

Copyright © 2006, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

Choosing a cloud hosting partner with confidence

More from The Register

next story
Same old iPad? NO. The new 'soft SIMs' are BIG NEWS
AppleSIM 'ware to allow quick switch of carriers
Arab States make play for greater government control of the internet
Nerds told to get lost in last-minute power grab bid at UN meeting
Brits: Google, can you scrape 60k pages from web, pleeease
Hey, c'mon Choc Factory, it's our 'right to be forgotten'
Of COURSE Stephen Elop's to blame for Nokia woes, says author
'Google did have some unique propositions for Nokia'
It's even GRIMMER up North after MEGA SKY BROADBAND OUTAGE
By 'eck! Eccles cake production thrown into jeopardy
Mobile coverage on trains really is pants
You thought it was just *insert your provider here*, but now we have numbers
Don't mess with Texas ('cos it's getting Google Fiber and you're not)
A bit late, but company says 1Gbps Austin network almost ready to compete with AT&T
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.