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Starting An MVNO, The Best Strategies For Success

My phone rings two or three times a week and after exchanging pleasantries, I ask, “How can I be of assistance?”

“I want to be an MVNO,” is what I hear.

Okay, the MVNO business is strong, currently valued at $78 billion, and projected to grow to $140 billion by 2032. Everyone wants to be the new Mint Mobile and everyone thinks it’s as easy as making a phone call or two, signing a contract and you’re off to the races. Don’t get me wrong, Atrium Unlimited Consulting has been very successful in getting many MVNOs started with carriers and aggregators over the past ten years, but there are two types of callers that I simply wish good luck, say goodbye to and then never hear from again:

In my opinion, these two strategies are doomed to fail. Why? Nobody survives on being the lowest cost provider, not when the top four MVNOs are owned by the carriers with extremely deep pockets (Boost owned by DISH, Cricket by AT&T, Tracfone by Verizon, and Metro by T-Mobile). New entrants simply can’t sustain a price battle and will eventually bleed enough capital that causes them to cease operations.

The same is with opening stores in urban areas. Boost Mobile and others that cater to the urban population with household incomes in the $35-$50,000 range have staked their claim in these markets and are backed by millions of dollars of advertising and promotions and the ability to offer handsets for free or at a fraction of what others do. Potential players in the MVNO space must realize that it's not simply buying a rate plan for $20, selling it for $40, and retiring in three years. A lot of people just don’t realize that as an MVNO, you must provide customer service, collect and remit taxes, provide handsets and accessories, pay lawyers and accountants, and deal with customers that think you are overcharging them.

Yes, an aggregator can relieve some of those items from your everyday to do list but then you are paying more and earning less, and at the end of the day, your MVNO does not own the customers, the aggregator does.

Let’s re-visit the two strategies above. The problem with both of these goes back to the basics of what I (and others) have been speaking about for years; you need to find a niche, or DIFFERENTIATOR and you must have a solid DISTRIBUTION network. Price is not a strategy! I recently read a survey that stated that 37% of prepaid subscribers bought because of price, and that survey was done amongst the four carrier-owned MVNOs.

I harp about a differentiator and who has been successful in defining its niche, Consumer Cellular with the over 55 year old crowd; Red Pocket Mobile who not only offered free calling to Japan when it launched but was the first MVNO to offer all four carriers under the same brand name. Recently launched MobileX right-sizes you bill for actual data used, not a big bucket plan. Other MVNOs donate a portion of your payment to political or other causes that they represent. And associations with millions of members offer a branded service to their these member at discounted prices.

Let’s Go Back To The Basics

I’m going to give you my opinion on what type of MVNO one should start, based on your financial resources, ability to penetrate new markets and most importantly, provide the carrier (or aggregator) with sufficient subscribers for you to be relevant.

Purchase An MVNO

This would be the quickest and easiest way to enter the MVNO market, acquiring a current entity that has all of the necessary government licenses and existing infrastructure. This would also make you the “carrier of record” in the eyes of the FCC and all tax issues (billing, collection, and remittance) would already be in place (a very arduous and expensive process to set up). This would also give you instant presence and, depending on the subscriber count, an immediate revenue stream.

The major benefit of you going down this path is when you plan your exit strategy, you “own” the customers, not just the revenue stream and any potential buyer would, like you, have instant entrée into the MVNO space.

Finally, you would need to do your due diligence on their business A-Z and make sure that you have a competent wireless operator at the helm.

Become a sub-MVNO or MVNO-Lite (as they are referred to).

T-Mobile is the most aggressive carrier of the Big Three and has four (4) aggregators that assist new entrants to the MVNO space. The plus side to going this route is a quick entry (8-10 weeks) into the market with a turn-key program where everything related to the Back Room is handled and your efforts are focused solely on sales and marketing. It is also much less costly than dealing with the carriers on a direct basis (see below) and you don’t have to worry about issues like tax collection/remittance, handsets or customer service. The one downside is that while you own the revenue stream that is generated, you don’t own the customers, meaning when you plan an exit, the customers stay with the aggregator, and you are selling only the revenue.

Become a direct MVNO a carrier (AT&T, T-Mobile, Verizon)

This is the ultimate goal of anyone that wants to enter the MVNO space. It can be expensive, with a long lead time, and real dollar commitments to achieve certain subscriber levels but the most profitable of all scenarios. Also, the hardest way to get into the business but the most rewarding. Detailed business plans, a true differentiator, and the ability to demonstrate the financial ability to be in it for the long run are required. The carriers are not real interested in putting on more direct MVNOs and have shown a tendency to purchase those who operate on their own networks (T-Mobile just announced its intentions to buy its largest independent dealer MVNO – Ultra Mobile – as well as Mint Mobile and aggregator Plum).

Regardless of the path that is chosen, here are my Top Ten items that MUST be accomplished for anyone wanting to be successful as a new MVNO:

  1. Understand your Target Audience: Begin by conducting thorough market research to identify your target audience. Determine their demographics, preferences, needs, and pain points. This information will help tailor your marketing strategies effectively.

  2. Develop a Unique Value Proposition: Differentiate your cellular service from existing competitors by offering a unique value proposition. Highlight features that address specific customer needs.

  3. Build a Strong Brand: Establish a strong brand identity that resonates with your target audience. Develop a compelling brand name, logo, and tagline that convey your brand values and positioning. Emphasize attributes such as reliability, innovation, affordability, or exceptional customer service.

  4. Create an Integrated Marketing Plan: Develop a comprehensive marketing plan that utilizes various channels and tactics to reach your target audience effectively. Consider a mix of traditional advertising, digital marketing (social media, online ads), and strategic partnerships with influencers or relevant organizations.

  5. Leverage Social Media: Develop engaging social media campaigns, share relevant content, and interact with customers to build brand awareness and loyalty.

  6. Offer Attractive Pricing Plans: Price sensitivity plays a significant role in consumer decision-making. Develop competitive and flexible pricing plans to attract customers. Consider offering value-added services, such as data bundles, free calls, or discounts, to incentivize sign-ups.

  7. Highlight Network Coverage and Reliability: In a highly connected world, network coverage and reliability are crucial for customers. Highlight your provider’s extensive coverage and emphasize its reliability, especially in rural or underserved areas.

  8. Provide Exceptional Customer Service: A positive customer experience can significantly impact brand perception and customer loyalty. Train your customer service representatives to deliver excellent service, promptly address customer queries or complaints, and implement user-friendly self-service options.

  9. Engage in Community Initiatives: Demonstrate your commitment to the local community by engaging in meaningful initiatives. Sponsor local events, support educational programs, and partner with others to showcase your brand's social responsibility and create positive brand associations.

  10. Re-Read #1-#9 and then hire a great regulatory attorney!

Finally, I spoke with Dan Thygesen, Senior Vice President, Wholesale and Platform Operations at T-Mobile this week. I asked him what one piece of advice he would have for someone who wants to enter the MVNO space. Dan told me that,

“Anyone looking to join the MVNO space needs to differentiate themselves in their offerings and , especially NOT on price. They need to know that there is a very sizable financial commitment, no matter what carrier they choose to go with, and they must be able to serve their customers as well as any of the MNOs or large MVNOs currently do.”

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