Mobile Virtual Network Operators (MVNOs) are having a serious moment right now. These agile, customer-focused wireless providers are rewriting the rules of telecom, growing their customer base at record speeds and beating traditional players on user satisfaction. But how does the MVNO business model work? How do they turn a profit without owning any network infrastructure? And why should you be paying attention to this business model right now?
Let’s dig into the MVNO playbook.
What exactly is an MVNO?
Let’s start with the basics. An MVNO is a wireless service provider that doesn’t own its own network infrastructure. Instead, MVNOs lease access to the networks of carriers, such as AT&T, T-Mobile, and Verizon.
MVNOs purchase network capacity at wholesale rates, rebrand it, and sell it directly to consumers.
This business model allows MVNOs to focus on what they do best —creating innovative mobile services tailored to their target market—without the massive costs and headaches associated with building and maintaining a physical network. By leaving the heavy lifting to the big carriers, MVNOs can be more nimble, creative, and responsive to customer needs.
The MVNO business model
The MVNO business model is all about strategic partnerships, creative pricing, and targeted marketing. If you’re looking to start an MVNO, it’s vital that you understand the mechanics. Here’s a breakdown of how MVNOs operate and turn a profit:
Wholesale network agreements: MVNOs buy network capacity at wholesale prices. These agreements vary widely in terms of pricing, data limits, and service quality, and getting a good deal is critical to the MVNO’s success.
Custom branding and unique offers: Unlike traditional carriers, MVNOs have the freedom to create unique, customer-centric brands that resonate with specific market segments. Whether it’s Mint Mobile’s low-cost, no-frills plans or Google Fi’s seamless international coverage, MVNOs carve out niches by catering to specific customer needs and preferences.
Flexible pricing and packaging: MVNOs compete with major carriers by offering more flexible, targeted, or affordable plans. They can experiment with pay-as-you-go models, no-contract options, family plans, or device bundles that appeal to specific consumer segments.
Lean operations: MVNOs keep costs low by operating leaner organizations. Without the need to invest in infrastructure, they can run with smaller teams, fewer (or no) retail locations, and digital-first customer service approaches, often using AI chatbots and online support to minimize overheads.
Customer acquisition and retention: MVNOs invest heavily in customer acquisition through digital marketing, partnerships, and sometimes celebrity endorsements (looking at you, Ryan Reynolds!). By delivering a strong customer experience and focusing on retention, they minimize churn and maximize lifetime customer value.
How do MVNOs generate revenue?
The primary revenue stream for an MVNO is straightforward: Selling mobile plans to consumers at a markup above the wholesale rates paid to the carriers. However, MVNOs can also tap into other income sources to boost profitability:
Upselling services: MVNOs often upsell additional services like international calling, data add-ons, or premium tech support. These incremental offerings help increase average revenue per user (ARPU).
Device sales and financing: Some MVNOs offer installment plans for devices like smartphones, tablets, and accessories.
Creative bundling: In recent years, tech-focused companies have begun embedding connectivity within their user experience and using it as a catalyst for earning more value from customers. Examples of creative bundling strategies include fintechs using phone plans to attract customers to their financial products, travel companies offering free travel eSIMs to their premium members, and HR tech platforms using corporate phone plans to enhance product stickiness.
Key challenges in launching an MVNO
Despite the advantages, running an MVNO is not without challenges. Here are a few hurdles MVNOs must navigate:
Network access: To operate in any market, businesses first need reliable network access. Traditionally, this involved months of negotiating wholesale contracts with carriers or with third parties such as MVNAs and MVNEs—contracts that often come with steep volume commitments. Once the agreements were in place, businesses then faced the arduous task of integrating their systems with the carriers' infrastructure, which could take several more months.
Building the user interface (UI): A seamless, user-friendly interface is essential for any mobile service. Customers expect a platform where they can easily browse plans, complete checkout, manage SIM/eSIM activations, port their numbers, and access customer support. Delivering a market-leading customer experience isn’t just a nice-to-have; it’s a critical component of a mobile service’s success.
Billing, taxes, and fees: Telecom billing is notoriously complicated due to the labyrinth of taxes and fees that apply to mobile services. Setting up a robust tax engine to ensure accurate application of these charges is vital. Any errors in this area could lead to compliance issues and scrutiny from telecom regulators.
Regulatory compliance: Telecom is one of the most heavily regulated industries, with laws and standards that differ across regions. MVNOs need to navigate and comply with a host of local regulations, covering everything from consumer protections and data privacy to service quality standards and tax filings. While this can be overwhelming, it’s an essential step to avoid penalties and establish a solid foundation for long-term success.
Historically, the technical and regulatory challenges of entering the telecom industry posed significant barriers for aspiring businesses. Today, however, end-to-end telecom operating systems have revolutionized the process, eliminating these obstacles and making it simpler than ever to launch an MVNO.
How much does it cost to start an MVNO?
In the past, launching an MVNO was a monumental challenge, requiring substantial upfront capital and resources. Companies faced daunting hurdles: Integrating with mobile networks, developing user interfaces, and navigating intricate compliance regulations. These processes demanded significant time, expertise, and investment just to get a mobile service off the ground.
Without robust automation tools, operational costs could spiral out of control. Routine tasks like billing, number porting, tax calculations, and customer support became major drains on time and money. Many MVNOs found themselves squeezed between low ARPU and high operational costs, making profitability an uphill battle.
Fortunately, the landscape has evolved. Just as Stripe revolutionized payments with easy-to-use APIs, modern telecom operating systems have transformed the process of launching a mobile service. These platforms drastically reduce both capital expenditure and operational costs, making the MVNO model more accessible than ever.
With the right telecom partner, businesses can now launch a white label MVNO in just a few weeks, and start turning a profit from Day One.
Why the MVNO model is booming right now
MVNOs are thriving because they meet today’s consumer demands for affordability, transparency, and flexibility.
The digital-first shift: Consumers are ditching traditional retail models and opting for digital-first experiences, which agile MVNOs excel at. Online sign-ups, app-based account management, and virtual customer support make switching to an MVNO simple and seamless.
Technological advancements: New technologies like eSIMs and 5G are making it easier for MVNOs to offer premium services without premium prices. They can swiftly adapt to new tech trends, keeping them ahead of some traditional operators.
Tech giants entering the game: Leading neobanks like Nubank and Revolut have recognized the power of integrating connectivity into their products. By bundling mobile with their existing financial services, these tech players are creating value-added ecosystems that deepen customer loyalty and expand their reach.
Is now the time to start an MVNO?
The MVNO market is poised for continued growth, and the barriers to entry are now lower than ever, thanks to all-in-one connectivity solutions like Gigs.
MVNOs have proven that you don’t need to own a network to win in the wireless game; you just need to know how to leverage one. The model is evolving, but at its core, it’s about delivering value, staying agile, and keeping the customer at the heart of everything you do.
If you can master that, the world of mobile connectivity is yours for the taking.