RESELLER CHANNEL: Outsourcers

Posted: 09/2002

Outsourcers
Turn Matchmakers with 'MVNO in a Box'

By Khali Henderson

THE MARRIAGE OF WIRELESS CARRIERS with consumer brands in a resale bond has been slow to take off in the Untied States. The so-called mobile virtual network operator (MVNO) model is suffering from a wait-and-see attitude -- especially on the part of U.S. carriers.

What are they waiting for? The results of the first U.S. MVNO pairing between Sprint PCS and Virgin Mobile to form Virgin Mobile USA, which consummated Oct. 5, 2001.

The company launched service in two markets in June and planned a full rollout in August. Forrester Research Inc. analyst Charles S. Golvin says the MVNO "has all the trappings for success." Among these are laser-like youth focus, simple service plans and a profit-driven prepaid infrastucture that assumes average revenue per user (ARPU) of $25 per month. Nevertheless, Virgin's success in other markets has been decidedly mixed. It has 1.8 million subscribers in the United Kingdom after having added 171,000 in second quarter, but in July shut down its venture with Singapore Telecommunications Ltd. (URL) after having gained only 30,000 customers since it opened in October.

Ken Hyers, a senior analyst for Cahners-Instat says, Virgin Mobile USA is underfunded and the Virgin Group is working to reduce its exposure by closing unprofitable operations. "The crucial test for [Virgin Mobile USA]," he says, "will be whether it can add enough customers in the fourth quarter of 2002, the busiest time of year for U.S. wireless carriers, to justify continued operation."

If that weren't enough reason for cold feet, there is another: An MVNO relationship is much more than signing a contract. It involves integrating systems and processes so the end customer is billed and served seamlessly.

To ease the pre-deal jitters, a new breed of enablement solutions has emerged to provide turnkey technology and services platforms specifically for MVNOs. Sentori, an eight-year-old billing and customer care vendor, launched in 1998 its Sentori Solution for "easy, fast, cheap" deployment and do-it-yourself management of provisioning, rating, billing and customers care, says Dave Dague, vice president of marketing for Sentori. It has been tapped by an undisclosed wireless carrier as it vendor of reference for private-branded wholesale customers. The Sentori Solution integrates with the host carrier network (at the switch or billing system) and then interfaces on behalf of the MVNO with all the required third-party providers, such as the call center, bill printer, bank, credit card clearinghouse, handset fulfillment company, etc. (see diagram bottom left).

Similarly, a new company, Visage Mobile, was founded in the spring of 2001. Its "MVNO-in-a-box" allows a carrier to host multiple MVNOs with a single integration effort by customizing its systems to the Visage Platform (see diagram below). On the other side of the aisle, it allows the MVNO -- a nontelco company -- to outsource the costs and complexities of operating a wireless service company.

"The key challenge for MVNOs is the 'telephoneness' of it," says Tom Bobich, vice president of marketing and product development for Visage Mobile. He explains they have to invest in billing and customer care systems, for example. As an alternative, Visage provides expertise and guidance in crafting a wireless service offering, delivering back-room services (customer care, billing, activation, content/media services) and handling network switching, number provisioning and roaming/interconnect issues. He says the firm even may handle the customization, inventory and distribution of the handsets. The MVNO focuses on branding, distribution and customer acquisition.

Sentori and Visage Mobile are seeking relationships with both carriers and brands. "Rather than wait for someone to knock on Verizon's door, we are proactive in developing relationships with brands," says Bobich.

Bobich says at present there is more interest from the brands than the carriers. He says Visage Mobile is working with a number of brands and at least one carrier he declined to name. He expects the carrier soon to be announced, with its first MVNO debuting in early 2003.

"In a year or two, there will be a dozen brands that are MVNOs," Bobich predicts. He expects some brands will be data-oriented like a Yahoo! while others, such as a Disney or an MTV, will focus on demographic niches, such as family or youth, respectively. Still others will be vertical in nature, such as Home Depot.

The Yankee Group analyst Paul Hughes agrees. "These carriers will likely offer similar services but with even more unique branding messages that can attract either customers who have not subscribed to a wireless service, or those customers interested in switching to an operator that fits their needs and beliefs, " he notes.

In addition to well-known retailers, The Yankee Group expects to see more niche-focused organizations become MVNOs. "These entrants have strong customer loyalty bonds because their relationships are built on common affinity or a unique sales and distribution channel," Hughes says. The ties lie outside basic financial contracts and, thus, mitigate price-sensitivity of typical wireless customers, he adds.

Sentori already has a relationship with one unnamed carrier and two of its MVNOs that fit into this niche category: Working Assets and Excel Communications Inc. Both are using a service bureau model, but Working Assets' Sentori platform is deployed at the EUR Systems while Sentori hosts the system for Excel. Sentori is targeting other groups in this subcategory, including ethnic marketers, universities, sports franchises and associations.

Regardless of the MVNO's "brand-width," the nature of the close MVNO-customer relationship dictates that the MVNO maintain control over how it interacts with customers, says Hughes, noting that means managing billing and customer care priorities and processes.

The Yankee Group says outsourcing can be a good option for MVNOs, especially in the early stages, since they may not have billing domain expertise. Smaller MVNOs will have a greater propensity to outsource for quicker time to market and lower upfront costs, it asserts.

Visage and Sentori are peddling both those themes to MVNOs. Visage, for example, expects a standalone MVNO will spend between $245 million and $310 million to get to market, while Visage customers will spend $15 million to $25 million (see chart at left) Sentori's platform license runs $400,000 to $800,000 plus 20 percent for professional services fees, but on a hosted basis, which MVNOs typically choose, it's about 15 percent to 25 percent of the equivalent license cost for the setup fee plus a monthly subscription, says Dague. Entry-level fees are $20,000 to 30,000 per month, he says.

Dague says, in addition to having a low entry cost and speed to market, MVNOs will require an integrated customer management system that eliminates manual processes, thus taking the costs and expertise requirements out of the proposition.

MVNO in a Box
Source: Visage Mobile

Sentori Solution: How It Works
Source: Sentori

Potential Cost Savings from Outsourcing
Source: Visage Mobile