Why U.S. MVNOs will find it hard to survive

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First there was the spectacular demise of ESPN Mobile (the MVNO), then there was slow and timely death of Amp’d Mobile. ESPN Mobile was idiotic – who is going to pay about $60 a month the whole year to watch ESPN on a small screen, when most fans follow just one sport (e.g. baseball or football or basketball) and ONLY during the season. Amp’d was stupid – they invested in expanding in other countries, when they were hardly getting any customers in the main base in the U.S.

And now Helio is not so far behind. Helio is a Mobile Virtual Network Operator (MVNO) launched on May 2, 2006 by Earthlink founder Sky Dayton. It is a $440 million joint venture between SK Telecom, the South Korean mobile operator, and Earthlink. Helio runs on the Sprint Nextel network and is marketed to the younger demographic, to carve out a niche with technology-savvy. Helio and its parent Earthlink both reported losses for the second quarter. Helio passed the 100,000-subscriber milestone in the second quarter but only generated $33.2 million in revenue for a $83.8 million loss. Fortunately, the joint owners of Helio have each agreed to provide the MVNO with an additional $100 million in funding (suckers!).

There have been successful MVNOs – the biggest success stories are prepaid providers Tracphone Wireless and Virgin Mobile USA. These folks got early starts and concentrated at the low end of the market. So why is it hard to be a MVNO?

You see MVNO’s are a bit like standalone VoIP providers – because they are mostly unknown and unheard of, MVNOs and VoIP providers have to spend a lot of money on acquiring customers. The mistake MVNO’s make is to market on popular media at a huge cost, and end up mostly wasting their marketing dollars.

The whole point of being an MVNO is to focus on a niche area that others are ignoring and focus on serving these customers well. The key is to know the target market, get the right distribution channels and offer a product the big carriers can’t. This is where MVNO’s must use guerilla marketing tactics to get to the right demographic. MVNO’s should market to targeted media – essentially use the same techniques that Toyota’s scion uses.

Otherwise, Helio and others like it will end up in the RIP list.

One thought on “Why U.S. MVNOs will find it hard to survive”

  1. Helio will not survive because of their abysmal customer service and their horrible tendency to tell you one thing, then the next CSR tells you another..if you are lucky..usually, their response is “I don’t know.”

    I dumped them after six months and have no regrets.

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