Mobile virtual network operators will likely join the ranks with most Americans facing a tough holiday season with mixed forecasts as to whether MVNOs will come out strong or gasping for breath.
Tole Hart, analyst for Gartner, thinks the next few months will be tough on MVNOs, indeed, as it will be tough on many other consumer goods and services.
“The silver lining is that they are prepaid so people may look to use these services as they budget more, but ARPU should be impacted due to more spending restrictions,” Hart said.
Hart noted that MVNOs have been getting creative lately, trying to mimic top national carriers. However, in times like these, it might be best for the operators to stick to their roots, offering prepaid, cheap and no-contract based plans to potential customers.
Cato Rasmussen, head of solution strategy for Martin Dawes Systems, an international provider of services to help set up and run MVNOs, said this might be the perfect time for a new MVNO to enter the market and try its luck, even while many U.S. MVNOs have tanked in the past few years.
“Big brands don’t guarantee success,” Rasmussen said. “MVNO success doesn’t appear to come from spending millions of dollars on high-profile ad campaigns or acquiring “premium” content. It comes from careful investment, market research, targeted marketing and finding the right partner.”
The operators that have managed to stay afloat, however, are taking the necessary precautions to retain and even attract customers. With Black Friday here and gone and Christmas only weeks away, deals are everywhere. Kajeet, a no-contract operator targeting the youth market, has puts its products and services on Amazon.com and is featured in the Amazon Toy List for this holiday season. While Kajeet has faced scrutiny and rumors of bankruptcy, this could be a last ditch effort to bring in some festive revenue.
“As far as Kajeet, I am a believer in distribution but if you are not going to have distribution then the web is the next best alternative, and Amazon.com is the place be on the web, so it is a good move, based on their current cost structure,” Hart said. “Time will tell if they can reduce distribution and still be successful.”
Data boost
Some MVNOs have hopped on the data train, in hopes of making their services more attractive to consumers. Virgin Mobile USA Inc. recently closed on its purchase of Helio L.L.C, and with it gained investment and support from Korean telecom giant SK Telecom. Dan Longfield, industry analyst for Frost & Sullivan, is a big believer in SK Telecom and said Virgin Mobile USA could gain a lot from working closely with the Korean-based operator.
“[It’s] one of the top mobile carriers and I would not be surprised if Virgin is offering mobile data applications from Helio that are more advanced and better than some of the best stuff like Verizon and AT&T’s [offerings],” Longfield said.
Jayne Wallace, spokeswoman for Virgin Mobile USA, said the two SK Telecom members on its board will have input on key decisions and the operator will use their expertise to its advantage.
“We have already inherited data services and applications,” Wallace said. “We’ll be announcing new enhancements in a variety of areas including social networking over the next several weeks; many new features will be shared with both or prepaid and postpaid platforms.”
Smart devices
Virgin Mobile USA also launched its “totally unlimited” plan this year, which includes unlimited data. However, Gartner’s Hart noted that the operator might need to offer a smartphone soon to keep customers around or bring them in.
“Virgin could use a smartphone especially as it sells to its unlimited service product, but the problem with offering it to the prepaid market is that they have to subsidize the cost of the handset,” Hart said. “So that can be an expensive model for them. If the prices go down for smartphones and more prepaid users will pay close to the full price then that maybe a viable option. At this time your typical smartphone user is a postpaid user.”
While Wallace would not comment on Virgin Mobile USA’s future handset plans, she did say the Pantech Corp. Ocean device available through its Helio by Virgin Mobile hit that target.
When it comes to survival, Hart believes several MVNOs have the ability to ride out the economic wave with Tracfone Wireless Inc. and Virgin Mobile USA at the top of the list.
