MVNOt So Fast...
By Mike Masnick, Wed Aug 11 01:00:00 GMT 2004
EasyGroup made its big MVNO announcement today, but the road may not be so easy. Among the many challenges it faces, there's the news that Virgin Mobile's MVNO isn't doing quite as well as its marketing had suggested.
There was nothing really surprising about easyGroup's announcement to offer its own mobile phone service under an MVNO agreement with TDC. The company has been talking about these plans for months. Like most MVNO plans, the easyGroup offering will rely on another company, TDC, to handle all the heavy lifting on the technology side, while leaving all the branding and marketing efforts of up to easyGroup. One interesting move is easyGroup's plan not to offer phones (subsidized or not), but to simply sell SIM cards that can be used in any unlocked phone. It's a simple way to route around the need to deal with handset makers while also making the switching costs lower for many potential customers.
Of course, there will be some hurdles. The competition is already pretty strong, and competitor Orange appears to be welcoming Stelios Haji-Ioannou to the market by claiming that it owns the color orange when it comes to mobile phones. While it's likely that this is just a sour grapes move by a competitor, any legal battle may slow down important early marketing efforts.
A bigger concern, however, is whether or not the market really needs another player. Industry insiders, pundits and analysts have been talking about MVNOs over the last few years as if they're the next big thing. While the concept of being able to tape a popular brand on a mobile phone and have a brand new wireless operator may seem exciting, it's really just another competitor in an already crowded market. In fact, the big "success" story in the MVNO market, Virgin Mobile, is suddenly facing some of its own problems. Add a less than spectacular IPO to the news that a noticeable percentage of subscribers it was counting were actually inactive, along with the fact that many of its new prepay subscribers weren't using the phone very much at all, dragging down ARPUs, and the picture isn't quite as pretty. This isn't to say that the entire MVNO concept hasn't been a success. Virgin Mobile has done well overall so far. However, it is an indication that the market may not really be that excited to see yet another entrant who isn't offering anything all that new... other than an orange colored brand (which apparently isn't particularly new, either).