Margin Squeeze in the MVNO Market: Four practical ways to protect profit
It’s always important for MVNOs to celebrate when subscriber numbers go up. But growth alone doesn't guarantee a healthy business. I’ve lost count of the number of times I’ve seen MVNOs struggle to understand why good levels of customer acquisition and increased share isn’t generating a healthy profit. Dig a little deeper and lack of focus on the bottom line or failure to understand the dynamics of a marginal business are often the root cause. Why margins are under pressure Average revenue per user (ARPU) has been declining for some time, but today's economic environment has made the impact much more significant. Many network operators have responded by introducing annual inflation-linked price increases. Although this helps offset rising costs, it often damages customer relations and can lead to increased churn, something MVNOs have benefitted from. Few MVNOs have this luxury. They may win customers from MVNOs who price hike, but there’s little point in the long-term if they can’t make sufficient margin to cover the acquisition cost. There’s also the backdrop of wholesale arrangements, which can restrict the choices MVNOs have when it comes to making price adjustments. For instance, for MVNOs offering large data bundles or even unlimited, and relying on customers...
