MVNO business model - the commercial agreement

Ever wondered why the MNOs accept the virtual operators to interconnect?

  • MVNO Business Model – Niche Market
  • Marketing investment

The main reason why MNOs accept MVNOs to interconnect is that they can partially serve a niche market without investing in marketing efforts. This means the MNO can get a part of the profits of that market.

Now let’s look at what the business agreement means, the importance of the business model and the main questions you should ask your MNO regarding the agreement. The topics covered in this page are:

MVNO business model

MVNO business model

The main problem of a virtual operator lies in the MVNO business model. Most of the startups lack the strategies needed to grow their business.

The first thing an MVNO should do to create its business model is to decide on a niche market because it’s highly recommended to communicate and provide services to a specific segment.

An example would be an MVNO that created a business model out of selling telecommunication services to the African population in France that are charged cheaper for the calls they make towards the African countries. The MVNO uses technical solutions that serve this business model – cheaper routes from France to Africa.

There are a lot of business arrangements that can be made in this field. Multiple MVNOs target the travelers – they offer SIM cards for the people that travel around the world, and they have special roaming prices. There is a partnership between an MVNO and an airline company that can distribute the SIM cards, and they can both enjoy the branding benefits.

Pathway to creating your MVNO business model

  • 1.
    Niche Market
    The first thing an MVNO should do to create their business model is to decide their niche market. For high profitability, it is mandatory to communicate and provide services to a niche market.
  • 2.
    Communication needs
    The second thing MVNOs should do is to understand the communication needs of the niche market. Would you need more data sessions or more voice sessions or some special service tailored to specific needs?
  • 3.
    Service Packets
    Next, you need to make a concrete decision on what kind of packets you are going to offer to your subscribers and the prices available to them for those services. The services could be:
  • CS Voice
    Audio calls over 2G or 3G networks
  • SMS
    Regular short message service
  • MMS
    Multimedia messages service, infrequently used
  • USSD
    Unstructured supplementary services
  • Data 2G/3G
    GPRS or 3G cellular data service
  • Data 4G
    Data service on LTE networks
  • Voice over LTE
    HD voice service with simultaneous LTE data
  • WiFi data offload
    Use WiFi to provide data access to home network services
  • Voice over WiFi
    VoLTE support over offloaded WiFi data
  • IoT / MTC
    Internet of Things, Machine Type Communication, LTE Cat-M1 or nb-IoT
  • Multi-IMSI
    Support multiple IMSIs and possibly MSISDNs on a single SIM card
  • OTA SIM provisioning
    Over-The-Air messages for altering SIM parameters and installing applets
  • eSIM provisioning
    Support provisioning eSIM for smartphones or IoT / MTC devices
  • 4.
    Charging
    Next, you need to decide on the charging system you plan to have according to your MVNO business model.
  • Prepaid
    An authorization and reservation is made before providing the service
  • Postpaid
    Call Detail Records only, usage is known after the fact
  • Already exists
    A charging system is already installed and you need to inter-operate to it
  • RADIUS charging for
    Services charged over the RADIUS protocol: voice/data / SMS
  • Diameter charging for
    Services charged over the Diameter protocol: voice/data / SMS
  • JSON API charging for
    Services charged over JSON API requests: voice/data / SMS
  • Top-up by SMS or USSD
    Recharge credit using codes sent over SMS or USSD requests
MVNO business model - commercial agreement 1
  • 5.
    Marketing strategy
    Finally, you need to talk about your marketing strategy and how you plan on reaching your target customers and communicate your message to them.

Once your MVNO business model is in place, you move on to choose which MNO you are going to interconnect with and which one has the price offer that suits your business case.

MNO - MVNO commercial agreement

The main driver of the business of mobile operators is by far the marketing Stage of the business. This means ads, a local shop, and of course, employees and the entire activities that operators use to collect money from subscribers. This area of a mobile operator’s budget (Marketing) means nearly 45% of the total budget. 

There are a few reasons MNOs and MVNOs need each other to best serve their customers.

  • Niche markets
    The MVNOs are known as operators that serve a certain niche market. A niche market is a segment of a larger market that can be defined by its own unique needs, preferences, or identity that makes it different from the market at large. That's why an MNO would find it difficult to address niche markets as good as MVNOs
  • Marketing Outcomes
    There is a gap in the marketing outcomes between MNOs and MVNOs. An MVNO can achieve better marketing outcomes in niche markets at a lower cost than the MNO. The logical reason for the MNO agreeing to accept an MVNO is because he would rather share some of the money than seeing that niche leave to another operator.
  • The Cost of Marketing
    A small operator with a modest marketing budget will provide the same services at a lower price than a Tier 1 operator that invests a lot in marketing because he needs market recognition and still make some profit.

MVNO agreement - What to ask your MNO

Make sure you have a list of all the technical issues you need for your business. Now that all is set, and you have chosen an MNO, the following questions must be asked as a part of the MVNO agreement:

  • How are we going to interconnect?
    ✓ Internet or optical fiber?
    ✓ If its optical fiber, it’s going to be IP or TDM?
    ✓ What are the technical requirements for interconnecting?
    ✓ Make sure you have a list of all the technical issues you need for your business
  • How long will it take?
    ✓ The longer the interconnect takes the more it costs. You need to be prepared with
    ✓ The duration of an interconnect is based on multiple factors. There could be technical or business issues that would make the interconnect take longer than expected. The shortest one we implemented took us 2 months and the longest one took 1 year.
    ✓ The requirements of the MNO you’re interconnecting to have a strong word on how long it will take to deploy your business
  • How much will it cost?
    ✓ Is there a minimum fee?
    ✓ If you require special features be sure you know the price of them in advance.
    ✓ Are we going to agree on fixed prices or are we going to renegotiate the prices after a period of time?
    ✓ What is the deadline for payment?

Our solutions for MVNO Startup businesses

Once the MVNO business model is settled you need to get to the technical part of the MVNO startup. You have to build your network infrastructure and for that you need Core Network equipment. 

At YateBTS, we offer solutions to cut across all challenges faced by both MNOs and MVNOs. 

We have manufactured software-defined equipment for mobile networks serving MNOs and MVNOs, making it affordable and solving the cost factor. One of the main values of our company is the public pricing policy, offering the lowest cost and shortest path for MVNOs to achieve profitability. We helped interconnecting more than 20 mobile operators over time.

  • YateUCN

    ✔ A unified GSM and LTE Core Network that implements in software the functions of GMSC, GGSN and PGW
    ✔ YateUCN uses the HLR to localize the MSC/VLR of the called subscriber and routes the call to the designated MSC/VLR in the MNO network.
    ✔ It establishes and maintains the IP sessions of the subscriber and routes the IP packets to the SGSN in the MNO network.
  • YateHSS

    ✔ A software implemented product that provides the functionalities of LTE HSS and GSM HLR.
    ✔ You can use this product for both Circuit-switching and Packet-switching, so your subscribers can roam from a 4G network to a 2G/3G network and back.
  • YateSMSC

    ✔ A SMSC with the functions of receiving, forwarding, storing and delivering SMSs in GSM, UMTS, LTE or custom networks.
    ✔ Uses standard SS7/MAP and SMPP interfaces.
    ✔ USSD services are included in YateSMSC.

Types of tests for MVNO Startup

Even if you have a clear idea about the kind of virtual operator you want to be and your MVNO business model is in place, you still need to test the services you need to provide. 

The VoLTE Lab is a fully configured and functional test suite for Voice-over-LTE and a full LTE/GSM network that includes:

LTE LabKit – configurable test eNodeB/BTS
MiniCore – software-defined compact IMS Core Network
✔ Two iPhone 6s – UE with good VoLTE implementation

  • ✔ Calls - the duration and number of calls
    ✔ SMSs
    ✔ Data Sessions
  • Roaming
    ✔ How are the services working when roaming
    ✔ The average timeline of authentication when roaming
  • Billing platform
    ✔ If the charging system works appropriately
  • Testing in the operator’s own radio network
    ✔ Getting experience before entering the tests with the MNO