In today’s telecommunications industry, Mobile Virtual Network Operators (MVNOs) face growing pressures due to rising data costs, driven by surging usage. Clarity Beacon Consulting recently collaborated with a fast-growing MVNO to re-evaluate its cost structure and long-term go-to-market strategy. Through a detailed analysis of its existing MVNO agreements and future data growth projections, we identified a $1B+ cost-saving opportunity and devised a strategy to transition from full reliance on MVNO relationships to building its own wireless infrastructure in key markets.

Challenge:

Our client, an expanding MVNO, faced two primary issues:

• Unsustainable Long-Term MVNO Agreements: As subscriber data usage continued to rise, the cost structure under current MVNO agreements was becoming unmanageable. A 5- to 10-year projection showed that ongoing reliance on the MVNO model would severely hamper profitability.
• Strategic Growth Uncertainty: The company lacked a clear, scalable strategy for managing data demand growth while maintaining competitive pricing. Without a solution, escalating network costs would outpace revenue and limit future expansion.

Clarity Beacon Consulting’s Approach:

To address these challenges, we adopted a holistic approach focused on rethinking the client’s cost structure and charting a sustainable growth path.

1. MVNO Agreement Analysis and Data Growth Forecasting: We began with an in-depth review of the client’s MVNO agreements and projected data growth. Key insights included:
   • Data Usage Growth Projections: We forecasted a doubling of data consumption every two years, which would lead to a 200%+ increase in network costs over the next decade if no changes were made.
   • MVNO Model Limitations: The analysis showed that while the MVNO model was cost-effective during early growth, it would soon become unsustainable as data demand surged.
2. Identifying Strategic Data Offloading Areas: We conducted a geographic analysis to identify regions where transitioning to owned infrastructure would yield the greatest cost savings. Our findings revealed that:
   • High-Usage, Densely Populated Markets: Urban, densely populated areas with large business concentrations were driving the majority of data traffic. By developing independent infrastructure in these markets, the MVNO could significantly reduce its dependence on third-party MVNO agreements.
   • Data Offloading Strategy: We devised a detailed plan to offload data traffic from the MVNO network onto the client’s own infrastructure, targeting high-volume regions for maximum cost efficiency.
3. Capital Investment and ROI Assessment: We developed a financial model to calculate the capital investment required to build independent infrastructure and projected the long-term ROI. Key factors included:
   • Capital Expenditure (CapEx) Estimates: Our model outlined the necessary investments for network deployment, including spectrum acquisition and equipment costs.
   • 10-Year ROI Projections: The analysis indicated that this strategy could unlock over $1B in cost savings over a decade, factoring in subscriber growth, increasing data demand, and lower per-user service costs.

Return on Investment (ROI) Projections:

Our solution presented a clear business case for shifting away from full MVNO dependency. Key outcomes included:

• $1B+ in Cost Savings Over 10 Years: By building its own wireless infrastructure in high-usage markets, the MVNO stands to save over $1B within a decade.
• Sustainable Growth Path: The blended model of using both owned infrastructure and selective MVNO agreements gives the company the flexibility to scale without sacrificing profitability.
• Reduced Service Costs: Lower per-user data costs enabled by the new infrastructure will allow the client to offer more competitive pricing, positioning the MVNO for future market success.

Outcome and Strategic Recommendations:

By partnering with Clarity Beacon Consulting, the MVNO gained a clear roadmap to reduce its reliance on external MVNO agreements while maintaining cost efficiency as it scales. We recommended:

• Gradual Transition Strategy: Begin shifting data traffic in high-density markets to independent infrastructure over the next 2-3 years, developed in collaboration with U.S. and global network equipment providers.
• Optimized Infrastructure Investments: Prioritize regions where data offloading will have the greatest ROI and long-term cost-saving impact.
• Long-Term Competitive Positioning: With this strategy, the MVNO is positioned for sustainable growth, reducing network costs while enhancing profitability.

Conclusion:

Clarity Beacon Consulting’s tailored approach not only uncovered $1B+ in potential cost savings but also provided the MVNO with a blueprint for long-term growth. By transitioning to a more balanced infrastructure model, the client can continue scaling its operations while optimizing service delivery and maintaining a competitive edge in a dynamic telecommunications market.

If your business faces similar challenges, Clarity Beacon Consulting offers TMT Strategy Consulting to help you optimize your cost structures and create sustainable business models in today’s rapidly evolving market.