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Predicting the Future of Australia's MVNO Market

Wednesday, 30 Mar 2016

IA

The concept of a Mobile Virtual Network Operator (MVNO) is simple: A Mobile Network Operator (MNO) such as Telstra, Optus or Vodafone, sells its unused network capacity (e.g. voice or data) to a smaller company under a wholesale arrangement.

This company subsequently sells such capacity to its own customers under its own brand.

MNOs are able to benefit from this model by selling unused capacity to customers that are more difficult to capture under existing marketing and pricing plans.

The benefit to the MVNO is that they don’t have to invest in large mobile networks.

However, their margins tend to be slim and their operating models need to be efficient in order to generate sufficient operating cash flows.

In order to minimise costs, MVNOs tend to sell their offering primarily through online models or existing distribution channels and outsource their customer service overseas or to more cost effective locations.

In 2015 the Bring Your Own Device (BYOD) trend in Australia helped to further decrease operating expenses for most MVNOs due to lower customer acquisition costs, whilst the increased popularity of non-contract prepaid plans added to the top line.

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