Telecommunications

Virtually mobile
By Elena Bisogni and Elizabeth D. Bailey
From Disney to Virgin, nontraditional service providers
are applying their brand value and customer management
capabilities to create a whole new generation of wireless
companies. But as the field gets more crowded, will the
payoff from being a mobile virtual network operator
still outweigh the risks?

Although the credit card in your wallet comes ultimately from a financial institution, the
distinctive logo emblazoned on the front may belong to an entirely different organization:
a gasoline company, perhaps, a retail store or even your alma mater. Likewise, the name on
your mobile phone—and the brand identity associated with sales, marketing and customer
care—may actually be that of a company that has little to do with telecommunications. The
Virgin Group, The Walt Disney Company, ESPN—these companies and many more are now
reshaping the wireless industry as mobile virtual network operators, or MVNOs.

An MVNO is a company that
owns neither any part of the
mobile communications spectrum
nor its own network infrastructure
but instead applies its brand value
and customer management cap-
abilities to create a wireless
company. As a virtual provider
of mobile services, the enterprise
leases excess network capacity
from a traditional mobile operator
and sells it to its own customers.
Europe has led the MVNO market
during the past half-decade or so,
but the marketplace in the United
States is now surging as well.
Although there have been some
high-profile failures in the Asia
Pacific region, new Asian MVNOs
are likely to continue entering the
field as well. How hot are MVNOs?
One major carrier reports that in the
last year alone, it was approached
by approximately 100 companies
about potential MVNO initiatives.
The appeal is clear: In the wireless
industry, where the network itself is
becoming a commodity, companies
are now moving to differentiate
themselves based on the services
surrounding the network.
Some MVNOs are wireless resellers
focusing primarily on providing
distinctive voice and data services
to particular segments of the
Outlook 2006, Number 3 79
Telecommunications
marketplace. “Brand” MVNOs, on
the other hand, try to capitalize on
the value and power of their com-
pany name; putting that brand on
ubiquitous mobile devices is a way to
reach a new customer base, espe-
cially a younger one. A loyal cus-
tomer of a Virgin or Disney virtual
wireless operator is more likely to be
a consumer of all the other products
and services represented by that
brand. Thus, launching an MVNO can
be a critical part of a long-term brand
and customer acquisition strategy.
Yet as the number of players in the
mobile arena rises, so does the risk.
It is unclear how many MVNOs any
geographic market can support, but
it seems certain that not every
MVNO will survive long enough to
turn a profit. Based on the experi-
ences of a number of early adopters,
those contemplating an MVNO strat-
egy should bear in mind a number
of success factors.
Focus on a razor-sharp
value proposition
MVNOs exist only because of the
changing value propositions of the
mobile industry. As noted, the net-
works themselves are fast becoming
utilities and commodities. Value
now comes from the way a wireless
provider targets customers and cre-
ates value for them.
MVNOs base their strategies either
on targeting a part of the market-
place that is currently unserved or
underserved or, alternatively, in the
words of one wireless executive, by
“hyper-serving” a segment of the
population with an overwhelming
value proposition that convinces
consumers in that segment to switch
from their current provider.
A highly targeted market focus and
position, therefore, is key. TúYo
80 www.accenture.com/Outlook
Mobile—launched by US-based IDT
Corporation, a provider of wholesale
and retail telecommunications ser-
vices—is an interesting example of
an MVNO that knew its focus and
kept that focus razor sharp, starting
in the planning stage.
TúYo Mobile is a prepaid wireless
service for the Hispanic market in
the United States. (The brand name
is a combination of the Spanish
words for “you” and “me.”) TúYo
appeals to its targeted customer base
(more than 42 million Hispanics, the
largest minority in the United States)
with low international calling rates
from the United States to Mexico
and South America. The company
also offers other products, such as
downloadable, Latino-oriented ring
tones and graphics. With bilingual
service agents ready to serve cus-
tomers whose primary language is
Spanish, the company knows its
target customer segment and what
those customers are looking for.
Other companies are targeting other
kinds of customer values. For MVNOs
whose value is in the wireless ser-
vices themselves rather than in a
well-known retail brand name, the
players are pursuing well-defined
segments. The prepaid market, made
up of consumers for whom low price
is the primary value in wireless ser-
vices, has been particularly lucrative
and, accordingly, has become a battle
zone of competition, especially in
Europe. About 60 percent of Euro-
pean mobile users are customers of
prepaid or pay-as-you-go services, so
players such as easyMobile are look-
ing to grab a share of the “no-frills”
wireless marketplace.
US-based Voce, by contrast, touts
itself as a “luxury class” MVNO,
with a flat fee of $500 per month
and a new phone every four
months. Companies such as Amp’d
in the United States see themselves
primarily as mobile entertainment
companies, offering media and data
services, and only secondarily as
providers of voice services.
Two of the brand MVNOs, Disney
and its subsidiary ESPN, hope to
lure customers interested in family-
oriented and sports content, respec-
tively. Virgin Mobile is among the
companies that have primarily
targeted the youth market—a con-
stituency that had previously been
underserved and even, according to
CEO Dan Schulman, “under-loved.”
(For more on Virgin Mobile, read
an interview with Dan Schulman
on page 84.)
As several MVNOs have demon-
strated, however, it actually is
possible to get fairly far down the
planning path before realizing that
there is no consensus among criti-
cal decision makers and functional
groups about what constitutes the
value proposition for the virtual
launch. And if a company does not
know what the product is going to
do or to whom it will appeal, it
will launch without a clear and
compelling reason for a customer
to buy its service.
Concentrate on a scalable,
low-cost launch
The time between an MVNO’s
launch and the commercial rollout
of the service is usually very short:
six to nine months, on average. This
often puts a great deal of pressure
on a young company’s program
management skills—tying together
and coordinating all the activities
that must be planned, tracked and
measured. MVNO success is built, in
part, on the effective management
of third parties—an activity that can
be challenging for even the most
seasoned executives.
Keeping the launch cost as low as
possible is critical to reaching prof-
itability quickly. At the same time,
the MVNO market is not a place to
be testing a service or product
through a bare-bones approach.
MVNOs that compromise on quality
will come out of the gate slowly and
may never catch up. The best course
is to release a certain set of high-
quality capabilities that, from the
beginning, deliver a good customer
experience—focusing first, perhaps,
on the prepaid market—and then
scaling up over time.
Anticipate your
systems needs
Getting the underlying information
systems in place—customer care,
billing, service delivery platform and
so forth—is so important for MVNO
success that it can make or break a
deal. Some potential entrants to the
MVNO space have walked away
after many months of due diligence.
The companies have realized that
although they might have a robust
billing system in place for millions
of subscribers, it could take them as
long as two years—and a budget
twice that for the rest of the MVNO
launch—to fine-tune the system for
the intricacies and demands of being
a virtual wireless operator.
MVNOs have at least a couple of
options in seeking outside experience
and assistance with the technology
infrastructure and applications that
can improve their chances for suc-
cess. One is what is called a mobile
virtual network enabler, or MVNE,
which can provide turnkey solutions
and/or fully integrated managed ser-
vices for virtual operators covering
end-to-end IT capabilities, solutions
that the MVNOs are unable to pro-
vide. These include billing, CRM,
accounts receivable and the service
delivery platform.
Telecommunications

A second option for MVNOs that
want to create and operate their
own IT and back-office functionality
is to seek the support of integrators,
especially during the period immedi-
ately before the launch. This kind of
assistance can help the MVNO
develop the back-office capabilities
that can sustain long-term success.
That support was critical to NRJ
mobile, for example, an MVNO that is
majority owned by one of France’s
leading radio networks. The company
started operations in February 2005
and launched commercial services in
November. Because NRJ mobile
decided to create and operate its own
IT function, the company turned to an
integrator (the French bank CM-CIC,
with which NRJ has created NRJ
mobile) to help it design its informa-
tion systems along the entire customer
relationship management chain: from
opening and modifying accounts, to
online self-service features and billing,
to managing the interface with dis-
tributors. This support was key to
meeting the aggressive and demand-
ing timetable for the launch, enabling
NRJ mobile to reduce its financial
exposure and risk.
Customer service is king
The leading MVNOs have been able
to create a distinctive quality of
customer service appropriate for
their focused market segment. The
value of the MVNO wireless service,
remember, is no longer primarily in
the phone and the connectivity but
in the brand experience surrounding
the possession and use of the phone.

Steady growth
By 2009, MVNOs are expected to be an $8.3 billion market in the United States, with almost 25 million subscribers,
or about 10 percent of the world’s mobile market users. In Europe, the market is forecast to be worth $3.3 billion.

US MVNO market European MVNO market

Millions of Millions of
$ Billions subscribers $ Billions subscribers

10 Revenues 30 4.0 Revenues 18

Subscribers Subscribers 15.7
24.8 3.5 16
25
8 13.3
14
20.4 3.0
11.7
20 12
10.4
6 16.8 2.5
9.3
13.9
10
15 2.0
11.6 8
4 8.3 3.3
10 1.5 2.7
6.4 6
2.3
4.8 1.0 2.0
2 1.7 4
3.8 5
3.0 0.5 2
0 0 0 0
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009

Source: OVUM, June 2005 Source: OVUM, June 2005

Europe includes the United Kingdom, France, the Netherlands, Denmark, Finland

82 www.accenture.com/Outlook
At Virgin Mobile, the goal is to
have customer service mirror the
brand attributes. There are no
scripts for customer service people
to follow, because that would elim-
inate the company’s distinctive
spontaneity. Even customers using
automated self-service get a “very
hip” experience, according to com-
pany executives.
Self-service technologies that
can deliver a superior customer
experience while keeping costs
low are key to achieving high
performance as an MVNO. From
the beginning, NRJ mobile has
invested a great deal in self-service
capabilities, both through phone
and web interfaces.
NRJ mobile has calculated, for
example, that each customer call
costs five euros. So the company
has worked hard to set up simple
self-service functionality that
enables customers to quickly and
easily manage their own accounts.
NRJ mobile also has adapted the
reloading of prepaid cards to cus-
tomer preferences. New passwords,
for example, can be activated
through a scratch card at retail
stores, by confirming a number
stored on the company’s web portal
or by calling the service center.
Virgin Mobile has recently reengi-
neered its self-service capabilities,
especially its automated phone self-
service functions. In many indus-
tries, these systems are notorious for
alienating more customers than they
help. Based on a comprehensive
diagnosis of its existing capabilities,
however, Virgin has put in place
improved self-service capabilities
that enable customers to perform
more high-volume transactions
(replenishing prepaid cards, for
example) without assistance from
a live operator.
Retail, media, entertainment and About the authors
communications companies all view
the MVNO marketplace as an oppor- Elena Bisogni is a senior executive in
tunity to expand sales channels— the Accenture Communications & High
and improve cross-selling and Tech industry group. Since 1995, Ms.
up-selling performance with an Bisogni has consulted to wireline and
existing or new customer base—by wireless European telecommunications
delivering unique services and con- companies, working with these clients
tent directly to customers via a on business strategy, technological
branded mobile device. The market innovation, process reengineering
beckons to these companies because and application architecture design.
it gives them a chance to leverage Recently, she has been working with
their existing assets, such as content the Accenture Wireless group on solu-
or distribution channels, and increase tions for wireless carriers. Ms. Bisogni
the likelihood that the MVNO model is based in Rome.
will be profitable. Likewise, it appeals
to wireline and cable companies as a maria.elena.bisogni@accenture.com
way to leverage existing subscriber
bases and add a wireless component Elizabeth D. Bailey is a Seattle-based
to their service portfolios. partner in the Accenture
Communications & High Tech industry
Meanwhile, the traditional mobile group. Her work in this area includes
network providers are hardly stand- both MVNOs and traditional carriers
ing still. As they see the rising pop- building out their MVNO and MVNE
ularity of low-cost MVNOs, many capabilities. Under her leadership, Ms.
carriers are launching their own Bailey’s teams have helped multiple
competing services. Indeed, one of MVNOs with their initial launches.
the great unknowns in the MVNO
marketplace is the extent to which elizabeth.d.bailey@accenture.com
these traditional carriers will con-
tinue to see their leasing revenues as
adequate compensation for the loss
of customers to MVNOs running on
their networks.
Each type of MVNO player must
overcome the unique challenges
inherent in its business model.
Retailers and entertainment compa-
nies do not become communications
providers overnight. Likewise, com-
munications companies do not start
appealing to new generations of
customers overnight. Whatever the
industry, planning, launching and
operating an MVNO requires com-
panies to find, coordinate and
deploy the best thinking and best
operational capabilities they can.
Many will be called to high perfor-
mance in the MVNO marketplace,
but fewer will be chosen.
Outlook 2006, Number 3 83