Cannibalization. Reality or just a myth?

On mature telecom markets, upon liberalization, there was a lot of hype around the MVNO threat for incumbents. There are plenty of reasons why HNOs should not consider themselves threatened by MVNOs and all MVNOs negotiating with their chosen HNO should be aware of these aspects.

  • In fact, MVNOs do provide various economic benefits to HNOs as they increase their market share by addressing untargeted or poorly targeted market segments. However hard their marketing department tries, HNOs still struggle to cover all market segments and cannot experiment as they might like with myriads of campaigns without cannibalising other profitable packages or customer segments. Basically, if an operator is reluctant about embracing this business model, its competitors will surely welcome them, enjoying the possibility to attract new customers without additional costs or efforts.
  • On the other hand, enhanced service providers and full MVNOs with their own real time invoicing system, can become serious competitors for HNOs. The HNO is still in a favourable position in terms of market penetration and expansion, network utilization, lower operation costs due to higher economies of scale and generation of additional revenues through wholesale volumes.
  • Moreover, HNOs bear expensive license, network construction and marketing costs, which make them keen on sharing their network. MVNOs are the ideal opportunity in this respect.

Therefore, MVNOs may conclude profitable partnerships with the existing HNOs by creating a business plan and an attractive and straightforward business case beneficial for both parties, creating new revenue streams, addressing new customer segments whilst reducing their marketing costs and enhancing their product and service offering by various partnerships with innovative and value added services.