Feeds

MVNO bubble about to burst in the US?

New wave firms 'failed to learn lessons': analyst

The Power of One Infographic

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.

The Essential Guide to IT Transformation

More from The Register

next story
Major problems beset UK ISP filth filters: But it's OK, nobody uses them
It's almost as though pr0n was actually rather popular
Google Nest, ARM, Samsung pull out Thread to strangle ZigBee
But there's a flaw in Google's IP-based IoT system
Orange spent weekend spamming customers with TXTs
Zero, not infinity, is the Magic Number customers want
US freemium mobile network eyes up Europe
FreedomPop touts 'free' calls, texts and data
Apple orders huge MOUNTAIN of 80 MILLION 'Air' iPhone 6s
Bigger, harder trouser bulges foretold for fanbois
'Two-speed internet' storm turns FCC.gov into zero-speed website
Deadline for comments on net neutrality shake-up extended to Friday
NBN Co execs: No FTTN product until 2015
Faster? Not yet. Cheaper? No data
Oh girl, you jus' didn't: Level 3 slaps Verizon in Netflix throttle blowup
Just hook us up to more 10Gbps ports, backbone biz yells in tit-for-tat spat
prev story

Whitepapers

Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.