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Only strongest MVNOs will survive

A couple years ago, starting your very own mobile virtual network operations company was a sizzling hot idea and everybody was trying to cash in. But now, two years and a slue of MVNO closings later, the idea has fizzled. With the shut downs of Amp’d Mobile, Mobile ESPN, Disney Mobile and others, it seems no matter how hard they try or what demographic they target, most MVNOs cannot find the glue to make themselves stick.
So let’s start with the problems the companies have had. Eddie Hold, analyst at Current Analysis, said a big problem laid in most MVNOs demographic selections.
“They all think youth is a great target, but they forgot that it’s a market that the major carriers go after as well,” Hold said.
And even if large carriers aren’t using or targeting the same audience, when a good idea hits through an MVNO, it doesn’t take long for a large carrier to mimic the idea and keep or attract customers to its name.
“Carriers used MVNOs as incubators,” Hold said. “They kept an eye on them [MVNOs] and if they did something good, carriers jumped on the band wagon.”
For example, Disney Mobile featured a service called “child tracking” to provide parents with the comfort of knowing their children’s whereabouts, but 30 seconds later, Verizon Wireless launched the same service, Hold said.
Every MVNO that hit the wall suffered its own set of detrimental problems. According to a Current Analysis report, despite being connected to the Verizon Wireless network, Amp’d Mobile ceased operations because of financial problems. Current Analysis said the company burned through its cash, making it unable to pay bills and Amp’d customers actively not paying their bills didn’t help either.
The end of Amp’d followed Mobile ESPN’s disaster. The MVNO was assuming sports fans would dump their current wireless carriers to race to Mobile ESPN to buy handsets equipped with video sports clips and other sports content, despite prices. Mobile ESPN charged high prices for their initial handsets and folded after only attracting a few customers.

Kajeet troubles
And more recently, Kajeet Inc., a tween-driven mobile virtual network operator has not called it quits completely, but made a large chunk of cuts to its staff, with the reasoning of putting its focuses online and backing away from physical retail sales. That idea itself is one decision Hold says continues to hurt MVNOs.
“People don’t buy on the Web,” Hold said. “You have to have a real store in a real shopping mall.”
But it may be too late for that solution. MVNO Helio L.L.C. decided to go that route and open a few of its own retail stores. However, rumors have been swirling that the stores are closing and Helio may join Virgin Mobile USA.
“Helio should have died a year ago,” Hold said.
Helio was not available to comment.

Still contenders
But on a brighter note, joining the ranks of Virgin Mobile may not be such a bad idea; the company is one of the few MVNOs doing well. Jayne Wallace, head of corporate communications for Virgin Mobile, said the company continues to grow with 5 million customers.
“The size of the company lets us survive in these different times and in a different industry,” Wallace said.
Wallace said Virgin’s partnership with larger carrier Sprint Nextel Inc. is beneficial in terms of the network, the towers and the flexibility the carrier gives. Virgin recently also upped the ante by launching the “Totally Unlimited” plan. Set to release July 1st, the plan allows unlimited voice usage across days, nights or weekends for $80 a month.
Virgin Mobile came about in the days when Tracfone Wireless Inc. was basically the only prepaid option out there. Virgin made sure to target the youth market and have some appealing handsets.
“You could be proud to carry the phones around instead of having the Tracfone brick in your back pocket that mom and dad made you carry around,” Hold said.
For now, Virgin Mobile said its feels safe and steady within the gloomy and tumultuous MNVO world. Against Hold’s advice, the company currently has no retail stores of its own, but catches many eyes in the aisles of the wireless department at Best Buy stores, and has deals with other big-box stores including Wal-Mart and Target.
Though Wallace said the company does struggle with marketing and getting the word out , it plans to release a few more initiatives this year and keep banking on its partnership with Sprint.
And GreatCall Inc., which offers the Jitterbug MVNO service, closed $38 million in Series C funding. GreatCall said it will use the money to build out more sales channels and develop “innovative services, applications and devices to answer the needs of its rapidly expanding customer base.”


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