To be a Light or Full MVNO is a big dilemma. Any virtual mobile operator (see the definition of an MVNO) faces a tough choice: which parts of the value chain to undertake? Should we move towards full integration?
As a reminder, the value chain of a mobile operator can be divided into three major parts:
• Radio Access Network: the antenna network is the foundation of all mobile communications. It connects our smartphones to the internet via radio waves. The RAN represents a huge investment, which can only be afforded by the biggest players.
• Telecom services: this is the heart of telecom expertise. It involves managing SIM cards and routing calls/texts/data. It also implies to negotiate commercial agreements ("interconnections") with as many operators as possible to reduce costs.
• Customer relationship: applications and interfaces, customer service, billing, user device management, sales and marketing.
Traditional MNOs (Mobile Network Operators like BT or Orange) generally started out by creating a network of antennas (the RAN). Of course, they later integrated the rest of the chain.
Meanwhile, MVNOs (Mobile Virtual Network Operators) have a choice. They may decide to integrate a greater or lesser part of the chain. Because they are virtual, they do not have an antenna network and rely on an MNO for that, however, they can:
• Focus on customer service: this is the LIGHT MVNO model.
• Integrate customer service AND telecom services: this is the FULL MVNO model.
What is a Light MVNO?
A "Light MVNO" delegates the network’s operational management to its host operator, in order to focus on customer relations: sales, customer service, marketing...
This model makes it possible to create a mobile operator without bearing infrastructure costs. It is particularly relevant when the strength of the aspiring MVNO is marketing. In the past, it has often been the case when major retail brands launched a mobile offer (such as Tesco, Aldi, Auchan...). Thanks to the LIGHT model, they were able to leverage their existing customer base, while not having to integrate telecom know-how.
At the other end of the spectrum, this model also suites entrepreneurs. A “start-up” can easily launch a niche mobile offer without having to invest heavily. This was recently the case of Belgian start-up Neibo, who launched a responsible mobile offer on the Orange network. Check out other examples of MVNO in our white paper "17 inspiring MVNOs".
What is a Full MVNO?
A "Full MVNO" incorporates the telephone platform management. Basically, it creates a core network with its own infrastructure. Its perimeter is therefore broadened. It can manage its SIM cards, call flows, SMS flows or data flows. A full MVNO also negotiates commercial agreements with other operators. In short, the "Full MVNO" is the captain of its ship; it only depends on the MNO for the network of antennas.
This model is well-suited for large mobile projects. It may also interest an established light MVNO that would be willing to become more independent.
Reasons to remain a LIGHT MVNO & Reasons to become FULL MVNO
Mainly to avoid a huge investment. Building an infrastructure is very expensive and takes time. Negotiating interconnections is tedious. All this requires expertise and adequate human resources. All in all, becoming a FULL MVNO is an entirely different business model, focusing on telecom know-how rather than customer relations. It is a tiresome journey and it represents a colossal CAPEX.
However, it may result in long-term gain. Once managing everything in-house, the full MVNO may adopt a strategy to reduce its costs and lower its selling price. On the long run, the MVNO’s competitiveness is strengthened.
Providing a mobile phone service is a daunting task. It takes time, resources, experience... Fortunately, thanks to the MVNO format, a neo-operator has almost nothing to put in place. It can deliver mobile services in a couple of months, relying on the experience of specialized companies. This company may be an MNO or a full MVNO acting as an intermediary (we call these MVNE - Enabler).
For instance, Legos is an expert in creating mobile operators worldwide. We will be happy to assist you in this adventure. Tell us about your project or check out our resources for mobile entrepreneurs.