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The Achilles Heel for MVNOs

12th October , 2004

US : Great hype surrounds the mobile virtual network operator (MVNO) business model. According to a new Pyramid Research report titled "MVNOs: Playing to Win," MVNOs will constitute 20% of the 230 million mobile subscribers in the US by 2010. This vast market potential has not gone unnoticed with numerous entrants lining up and many more to come.

Pyramid Research analyst and report author Elizabeth Bramson-Boudreau states, "Contrary to popular opinion, MVNO success - much like the dot.com boom of the late 1990s - cannot be attained through good ideas alone." Long-term MVNO viability rests largely on the wholesale pricing agreement. Bramson-Boudreau argues, "The single most important factor in MVNO success is the wholesale airtime costs, as they account for as much as 50% of their operating expenses." A poor agreement strains the operator and yields lower EBITDA margins, proving that successful segmentation, high data usage and other value-added services cannot overcome a bad agreement.

Assessing the success of Virgin Mobile USA, our analysis illustrates that much of their accomplishments hinge on their agreement with Sprint PCS. Learning from past mistakes of unfavorable wholesale agreements in Singapore, Australia and the UK, Virgin Mobile USA appears to have successfully secured a profitable discount rate. "Most companies tend to focus more on branding and segmentation at the expense of wholesale arrangements. Our research indicates that getting this often overlooked piece right is essential," says Pyramid Research President Catherine Forster Connolly.

About "MVNOs: Playing to Win"

Following years spent researching and consulting in the MVNO sector, Pyramid Research has analyzed the most critical areas that predict and ensure MVNO success, including the wholesale pricing agreement and the average revenue per user (ARPU) levels attained. This report explores these areas, determining the best MVNO strategies in the US and worldwide. Write sales@pyr.com for a free excerpt.

About Pyramid Research

Pyramid Research provides in-depth coverage and analysis of the Fixed and Mobile Communications, Internet, Media, Wi-Fi and WiMax, and Mobile CAPEX markets of 85 countries.

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