5 things MVNOs must know before negotiating with operators

I’ve been involved in many negotiations for and with MVNOs and operators and learnt you should never expect it to be plain sailing. I’ve launched major supermarket MVNOs as well as headed up wholesale divisions. But no matter which side of the fence I’ve been on, negotiations are tough. I’ve seen dreams shattered and realised, and the determining factor is nearly always preparation.

Whether you are a new MVNO seeking a wholesale deal or an existing MVNO seeking to move host, make certain you are clear on these five things before you walk in the room:

1.What is your proposition and how will it bring incremental customers to your host network? Operators are always concerned about new MVNOs and what they will do to the market. It’s vital that you have real clarity about your proposition, who it serves and whether this is complementary to your MNO. 

Your first operator meeting will be where you demonstrate this and your understanding of the market, your customers and the needs of your host operator. Fail to do this, fail overall.

There’s another key point here – the prisoner’s dilemma. Most operators are designed to appeal to the mass market and the chances that an MVNO will take share from some of their target segments is inevitable. But operators will consider the prisoners dilemma – if they believe the MVNO will get a wholesale deal, and launch successfully, would they rather have it on their network than a competitors’? The answer is probably yes!

Numerous deals can therefore be driven by the concept, so while that’s helpful intel, you are only credible if you present a great plan and look like you are apealing to more than one operator.<link>

2.What you need – Obviously you want the best wholesale prices on everything, the most flexible technical set up, the best marketing and distribution support. But understand now, you won’t get it.

So before you meet, do the numbers. Based on your proposition, be really clear on the most important things you need. That way you have some chips to trade with and you can demonstrate that you know what is required to make the deal work, and most importantly have done the modelling. We always recommend a detailed and dynamic business financial model so you can understand the impact and importance of different variables.

3.Be realistic – operators are bored of hearing how you’ll get a million customers in five years. As soon as you are under NDA share your realistic business assumptions, based on real experience. This is easier if you are moving a base but even if you don’t have a single customer yet you should at least benchmark market assumptions.

Note that overly aggressive business case numbers will be viewed as fanciful and naïve. Remember that the operator you are engaging with will build its commercial offer around the numbers you supply. If you go in too high you may get offered some incredible rates linked to a minimum revenue guarantee. It’s been the ruin of many MVNOs.

4.Have a plan – The operators are extremely professional organisations in general. They will have a plan and a process for reviewing MVNO opportunities. They are also highly skilled in negotiating MVNO contracts having done it many times.

Even if you are changing operators it’s likely that this may only be your second time in a big wholesale negotiation. It’s imperative then that you work on your negotiation strategy, have a plan, allocate roles in the meetings, ensure you know where you can trade and what you are prepared to trade for. A good business model (mentioned above) will work here as you can step out of meetings and remodel rates and changes quickly, plus you will also know what you need to achieve and what the most cost sensitive areas are in your proposition.

5.Get professional help if you need it – There is no shame in not being an MVNO expert if you are a retail brand, TV station or football club setting up an MVNO. The operators will respect you if you recognise what you are great at such as distribution and captivating a fan base. They will respect you even more if you identify what you need help with. In some cases, the operators may give you some of that help but you should also either hire in experienced professionals for your team or work with advisors. The negotiations I’ve been involved in where MVNOs have enlisted this expertise have been smoother, more amicable and got the best result.

Negotiations are the toughest part in any new MVNO venture, but they can be positive experiences with the right preparation and expertise. If you need help to prepare or a safe pair of hands at the table with you then talk to us. It’s what we do.

James Gray

About James Gray

James has over 20 years of experience working in the telecoms and retail industries. He is an expert in subscription-based business models, CRM, direct and indirect channel management and major proposition development and launches. He has held a number of Marketing Director and Consumer Director roles.