In today’s telecommunications industry, Mobile Virtual Network Operators (MVNOs) are often challenged with rising data costs, especially as data usage continues to grow exponentially. Clarity Beacon Consulting recently partnered with a fast-growing MVNO to re-evaluate its cost structure and long-term go-to-market strategy. By analyzing its existing MVNO agreements and projecting future data growth, we uncovered a $1B+ cost-saving opportunity and devised a strategy to shift from complete reliance on an MVNO relationship to a quasi-independent wireless infrastructure in key markets

Challenge:

Our client, an expanding MVNO, was encountering a dilemma:

• Unsustainable Long-Term MVNO Agreements: As data usage soared among its subscribers, the cost structure of its current MVNO agreements was becoming increasingly unsustainable. This was particularly concerning when considering a 5- to 10-year horizon, where continued reliance on its MVNO partner would severely limit profitability.
• Strategic Growth Uncertainty: The company lacked a clear path for managing its rapid growth in data demand while maintaining competitive service pricing. Without a scalable solution, network costs would outpace revenue, restricting future expansion.

Clarity Beacon Consulting’s Approach:

To tackle these challenges, we implemented a holistic approach focused on rethinking the client’s cost structure and mapping out a sustainable go-to-market strategy

1. MVNO Agreement Analysis and Data Growth Forecasting:
We began by thoroughly analyzing the client’s existing MVNO contracts, pricing structures, and projected growth in data usage. Key findings revealed:

• Data Usage Growth Projections: With data consumption expected to double every 2 years, continuing with current MVNO agreements would result in unsustainable costs, with network expenses projected to increase by 200%+ over the next decade
• Limitations of MVNO Model: The analysis clearly demonstrated that the MVNO model, while cost-effective for the initial phase of growth, would severely limit the company’s profitability as subscriber data demands grew

2. Mapping Strategic Data Offloading Areas:
To defray these escalating costs, we conducted a geographic analysis to identify U.S. cities where transitioning to an independent wireless network would yield the greatest benefits. Our analysis revealed that:

• High-Usage, Densely Populated Markets: Urban areas with dense populations and concentrations of major businesses were driving the bulk of the client’s data usage. By building its own wireless infrastructure in these regions, the MVNO could significantly reduce its reliance on MVNO agreements
• Data Offloading Strategy: We mapped out a comprehensive plan for transitioning a portion of data traffic off the MVNO network and onto its own infrastructure, allowing the client to manage high-volume data usage more efficiently and at a lower cost

3. Capital Investment and ROI Assessment:
We built a detailed financial model to compute the capital investment required to execute this transition. Key aspects of the model included:

• Capital Expenditure (CapEx) Estimates: We estimated the upfront investment necessary for building independent wireless infrastructure in high-usage markets, including spectrum acquisition, equipment costs, and network deployment expenses.
• 10-Year ROI Projections: Our analysis showed that over a 10-year timeframe, this strategic shift could unlock over $1billion in cost savings, taking into account subscriber growth, increased data demand, and lower per-user service costs.

Return on Investment (ROI) Projections:

The results of our analysis indicated a compelling business case for transitioning away from a fully MVNO-dependent model. Key outcomes included:

• $1B+ in Cost Savings Over 10 Years: By implementing the independent wireless network in high-usage markets, the MVNO could realize $1B+ in savings over the next decade
• Sustainable Growth Path: The hybrid model—using both MVNO agreements and quasi-independent wireless infrastructure—provided the flexibility needed to scale services without sacrificing profitability
• Lowered Service Costs: The transition would allow the client to offer more competitive pricing to consumers by lowering the cost per gigabyte of data, making the MVNO more competitive in the market and a key element in their growth strategy

Outcome and Strategic Recommendations:

By partnering with Clarity Beacon Consulting, the MVNO now has a clear roadmap to reduce reliance on its MVNO partner while maintaining cost efficiency as it grows. Key recommendations include:

• Gradual Transition Strategy: Initiate the offloading of data traffic in high-density markets to independent infrastructure developed in collaboration with both U.S. and international networking equipment manufacturers over the next 2-3 years to mitigate immediate costs
• Optimized Infrastructure Investments: Prioritize markets where data offloading will have the highest ROI and long-term impact on cost savings
• Long-Term Competitive Advantage: With this strategy in place, the MVNO is well-positioned to grow sustainably, reducing network costs and increasing profitability without compromising service quality

Conclusion:

Clarity Beacon Consulting’s tailored cost strategy for this fast-growing MVNO has not only uncovered $1 billion in potential savings but has also provided a roadmap for long-term growth through network independence. By transitioning to a hybrid model with targeted infrastructure investments, the MVNO can sustain its growth trajectory, optimize service delivery, and remain competitive in the dynamic telecom industry.

Similarly, Clarity Beacon Consulting offers TMT Strategy Consulting to technology, media, and telecommunications companies seeking to revamp their go-to-market strategies. We focus on optimizing cost structures and creating sustainable business models to adapt to a more price-sensitive consumer landscape with numerous options in tomorrow’s market.