Colin's Journal

Colin's Journal: A place for thoughts about politics, software, and daily life.

July 10th, 2005

Mobile Virtual Network Operators

Yesterday I had to get a phone for Shana, entailing a shopping trip around Tottenham Court Road. I had decided to get a phone on the same network I use (Orange) in order to lower costs when calling each other. Orange’s selection of pre-pay phones, however, is small and dated. I considered moving to a contract in order to get a better phone, but their costs are high (minimum of £19 per month) and don’t offer much discount to the cost of their better phones.

Virgin on the other hand have a good selection of modern phones, all at reasonable prices. Their call rates are generally lower than Orange, especially for texting (3p between Virgin phones, 12p between Orange phones). It quickly became obvious that getting a phone on Virgin made the most sense – and that’s exactly what I did.

Tree roots growing in the side of a cliffI had already bought a Virgin phone back at Christmas, but was using my old pre-Toronto Orange SIM. With Shana on Virgin it made sense for me to move to the same network, so I called up Orange for my PAC to allow my existing number to be moved to Virgin. When I called Virgin their porting team were busy, so they offered to call me back as soon as they were available, which they did just 10 minutes later. I get to keep my existing number and take advantage of lower call rates – exactly what number portability was intended to provide.

Some in the telecommunications industry underestimate the significance of MVNOs like Virgin. The argument runs that, as these companies own no network capacity, they are essentially just marketing companies who’s only asset is their brand.

This analysis ignores two other value propositions that MVNOs have access to. Firstly MVNOs are buying capacity from ordinary mobile providers in large volumes, and so they have tremendous pricing power. When a with-network mobile provider needs to reduce costs they have to do this the hard way – streamlining their OSS systems and processes, putting pressure on their network kit vendors, etc. An MVNO has an easier task, they simply shop around to the other network providers and through this negotiate lower rates.

The second source of value for an MVNO is customer service. Once network access is secured and their operating prices set, the only way for them to increase margins is to improve operational effectiveness. With no network to run, all their management effort can be spent on improving customer service.

My move to Virgin isn’t driven by their marketing or brand. They offer better phones, lower call prices, and good service. Dismissing the MVNOs as marketing shells is a mistake.

Photo taken on a recent walk around Silverdale, Lancashire.

Copyright 2015 Colin Stewart

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