MVNOs blame wholesale costs for shortfall

17 Apr 2015

China’s mobile virtual network operators (MVNOs) are failing to meet expectations due to high wholesale prices and operating costs and shaky business models, C114 writes, citing a report from IBM Global Business Services which surveyed 18 of the nation’s 42 MVNOs. According to the report, around half of the providers surveyed admitted that their wireless resale businesses were falling short of targets and blamed the lack of a good business model for wireless resale in China. Around a third of the MVNOs surveyed indicated that they would look to transition to a full mobile network operator (MNO) model, if the option became available.

Sector regulator the Ministry of Industry and Information Technology (MIIT) began issuing MVNO licences in late 2013 as part of a two-year trial to assess the potential impact MVNOs could have on competition in the sector. The majority of MVNOs have, however, struggled to compete with incumbent MNOs, due to the high wholesale prices set by their host networks which have squeezed profits, or eliminated them entirely. Indeed, several providers take a loss on their MVNO services in the hope that the offering will help promote their core business. Making matters worse, MVNOs are also faced with competition from over-the-top (OTT) apps, many of which are completely free.

According to TeleGeography’s GlobalComms Database, the MIIT predicted much greater success for the MVNO market, projecting that the sector would represent around 50 million subscribers by the end of the trial in December 2015. By the end of 2014, however, there were just over two million MVNO subscribers.