Pyramid Research: MVNO Financials Less Attractive than the Hype Suggests

According to a new report from Pyramid Research, "the global MVNO subscriber base surpassed 63m subscribers at YE2005, up 25 percent from the previous year. While the report also found that "MVNOs account for 2.75 percent of the world's mobile users and is projected to rise to 3.3 percent by 2010, reaching more than 100 million subscribers, Pyramid Research believes that "the MVNO business faces many challenges and its financials are not as attractive as the hype would suggest."

Pyramid found that "most MVNOs are loss-making to slightly above break-even and believes that there is enough fodder to question the MVNO model, at least in its first iterations." The report cites the following examples:

• Segment pioneer Virgin Mobile UK is profitable, but the company has been in operation since 1999
• US MVNO Tracfone has been in the market for a few years and sees EBITDA margins at around 10-15 percent
• The pioneer of low-cost MVNOs, Telmore, had even lower EBITDA margins at YE2004.

Guy Zibi at Pyramid research said, "The traditional MVNO model has long been a cost story, with the MVNO venture focusing on reducing costs and churn while anticipating lower ARPU levels mainly as a result of its predominantly prepaid subscriber base."