Operators, too, have little appetite for wholesale data MVNOs. They have seen how the prepay philosophy initially offered new markets and low start-up costs, but for voice, and then text, it quickly became a price-driven race to the bottom. On 4G, a similar arrangement will lead to further margin cutting – but this time with the risks associated with unpredictably high data use. 

All of this points to a major shift towards more differentiated services from MVNOs, above all delivered on a post-pay basis. It requires more infrastructure, perhaps from a new breed of MVNE with as much a fulfilment focus as a technical focus. This will unlock the next wave of competitive customer engagement strategies.

When an MVNO owns the billing relationship and has real-time insight from its platform partner into the data and services used, there is much more room for service innovation. There is the opportunity for sophisticated plays like just-in-time offers and upgrade packs which are based on real-time credit control. It removes any nasty surprises (iD Mobile’s plans are called “ShockProof”) and keeps the customer firmly in control, yet generates significantly higher ARPU.

Compare this with the prepay environment, which is fundamentally one of inconvenience: as with prepay electricity meters, the main brand contact is when the lights go out – hardly a source of engaged and loyal customers. In the words of Piran Partners, “The advent of LTE means having control over data will be key. Traditional ‘Lite’ MVNO models will need to evolve for service innovation.”_[4]

With billing relationships come the obligation for customer service, which is a significant expense – and one of the original drivers of hands-off prepay. In the spirit of giving the customer total control, as much service as possible will be devolved to that customer through self-service functionality either on a website or, better still, embedded in a branded app on the device. The user is rewarded with freedom and transparency.

The marketing path to this evolution is becoming clearer too. MVNOs have traditionally been discounters, but the move to postpay and data services will allow them to avoid the price-driven race to the bottom and compete on packaged services. Today’s main bolt-ons to differentiate services are existing OTT content partners, especially music distributors like Spotify and Deezer; but we can expect more from MVNOs moving forward. Branded apps, again, will allow bespoke services to be delivered on-board, seamlessly and with as few clicks as possible, especially once MVNOs become more autonomous from operators. Furthermore, while the original MVNOs were well-known brands, especially retailers, the strength of these badged packages may well also unlock completely new MVNO offers, which are marketed online and exist without the support of a prior brand sponsor.

The MVNO of the future can therefore be characterised as a post-pay offering. It will move towards upscale and smart devices – and embrace more than one device (or SIM) per customer (and more than one customer per contract, targeting, for example, whole families with inbuilt smart parental controls). It will include services from recognised third-party brands, with on-boarding or selection of future partners at low marginal cost. And a rich self-service app-driven interface will make the customer relationship infinitely customisable.

To reach this new paradigm, existing MVNOs must not only abandon prepay technology, they must abandon the hands-off prepay customer experience and embrace a wholly customer-focused approach. They will have to use customer insight to find profitable niches by which to differentiate. That market and customer awareness will then inform product design to construct competitive and appealing services, all without eroding the customer base they already have.

This must be delivered via a platform partner with the agility to deliver an increasing range of back-office functions in real-time and with ever greater analytical granularity. As customer experience management, analytical insights and CRM become the responsibility of the brand owner, so their reputation will be intertwined with the partner they choose. The next generation of partner will know as much about marketing as technology and be capable of extracting value by consistently differentiating customer niches.

Welcome to the post-pay MVNO in its twenties: smarter, more mature, with differentiated services and a great customer relationship.

1. Piran Partners, ‘Where next for MVNOs?”
   
2. Boston Consulting Group, “American Millennials: Deciphering the Enigma Generation”
   
3. Dixons Carphone, "Introducing iD: The new mobile phone network built around customers"
   
4. Piran Partners, "MVNOs – a snapshot and the opportunities"