The art of the wholesale deal: 5 things Every MVNO must do
A deep dive into the stats on global MVNOs surfaces just how active the market is. In fact, I think it’s the most active I’ve ever known it.
In terms of size alone, there are more than 2,100 MVNOs worldwide. Together they serve around 5% of the world’s 5.8 billion mobile subscriptions.
In the last ten years, the sector has grown by 60%, which equates to around 800 new MVNO launches. By my calculations, that results in the need for 500 wholesale negotiations every year, either between new entrants and MNOs, or existing MVNOs renegotiating their contracts or attempting to change network partners.
With so many negotiations happening day to day, you’d think there would be plenty of knowledge on how to do it well and get the result you want. Sadly not.
Firstly, in my experience, many MVNOs approach wholesale negotiations with the wrong mindset. I don’t want to use the word haggle, but it’s probably the quickest way to sum up the problem. It just doesn’t work to go in thinking you can get a rock bottom price, and it won’t secure the deal you need for launch, growth or stability.
A negotiation of any kind requires thorough preparation, which includes a full understanding of the host’s objectives. When you know what their strategy is you can show how your MVNO will help them achieve it.
What’s more, this approach always breeds good relationships and respect, which is critical for developing a long-lasting partnership.
There are five things we recommend you consider to get match fit. These are taken from our popular masterclass ‘The art of the wholsale deal’.
1. Why would operators work with you?
As we’ve already said, knowing how you will help an MNO be successful is fundamental to your MVNO’s success.
Many MVNOs spend weeks refining what they want from a wholesale deal but very little time understanding what the operator wants from them.
Operators typically enter wholesale partnerships for one of six reasons:
- to monetise spare network capacity
- satisfy regulatory requirements
- access new customer segments
- enter new verticals
- drive wholesale margin growth
- or simply prevent a competitor from winning the business
Your pitch should clearly demonstrate how your MVNO helps the operator achieve one or more of these objectives. The stronger the strategic fit, the stronger your negotiating position becomes.
2. What’s your pitch?
Before wholesale pricing is discussed, operators assess whether an MVNO is worth their time.
The sorts of things they look for are sources of credible funding, a differentiated proposition, realistic forecasts (easy to get wrong, hard to get right), access to customers, strong distribution channels, experienced leadership and a clear understanding of the technical and commercial requirements of launching a mobile service.
It’s clear from that list that you’ll need to present a compelling business case built upon robust customer insight. You must also have a realistic set of growth assumptions. This instils confidence in the team too.
But remember, launching is one thing, attracting customers, keeping them and acquiring more is quite another. Be prepared for a lot of scrutiny at this stage.
3. What levers do you have?
The best negotiators enter the ring knowing what levers that have to pull. For a new MVNO, leverage may come from access to a unique customer base, a powerful brand, regulatory support or a proposition that addresses an underserved segment.
But be aware that you also have vulnerabilities when you’re the new kid, like limited telecoms experience, forecasts that carry assumptions or a lack of technical or operational capability. Knowing how you bridge the gaps is important to show you’ve thought everything through and are in control of a strategy that can stand up to the challenges of trading.
In comparison, trading MVNOs have (usually) proven they have the ingredients to be successful and are generating wholesale revenues for their host.
It’s not all plain sailing though. Churn, acquisition costs and competition can all be a thorn in the side.
Whatever your situation you need to be ready to justify your plans and show evidence it’s founded on data not a hunch.
4. Is a low price really all you want?
The wholesale rate card and margin ire important for start-up MVNOs, but many of the most valuable elements of a contract sit elsewhere.
Access to new technologies, service level agreements, the pricing review process, clear frameworks for dispute resolutions and timetables for contracts reviews will all have a significant impact on long-term profitability, your ability to trade competitively and flexibility to move host.
Make sure if 6G launches in the next 3-5 years you have access. Consider your plan for D2D satellite communications or eSIM. What if an AI customer management tool is made available by your host but you can’t use it? If you can’t get access to things that improve margin, proposition and customer experience then you significantly undermine all the efforts for launch.
5. Are you ready to negotiate with professionals?
Wholesale teams negotiate every day. They use well-established negotiating techniques ranging from extreme opening positions and strategic concessions through to “good cop, bad cop” tactics and last-minute requests before signature. It’s a game you need to be ready to play.[JG1]
I know because I have sat on both sides of the table and written the playbook. In fact, when we deliver our masterclasses at conferences, the MNOs visibly blanche with embarrassment when we get to the part warning MVNOs of the techniques MNOs use.
The best defence to these tactics is preparation. Understand your objectives, know your walk-away position, maintain alternative options wherever possible and remember that the goal is not simply to win a negotiation but to build a partnership that can support sustainable growth.
And if you still don’t know where to start, get someone who does on your team.
If you take one thing from this list, then it’s prepare. And do so strategically. You need a compelling proposition, a clear understanding of operator motivations and a contract that supports long-term success.
Whether you are launching a new MVNO or preparing to renegotiate an existing agreement, investing time in planning your wholesale strategy will almost always deliver greater returns than focusing exclusively on price.
Learn more about our masterclasses and how they can help you prepare here.
And if you want to talk specifics for a forthcoming negotiation or even appoint us as your negotiator then get in touch. It’s what we do.
