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MVNO business is all the rage these days. The latest to launch is retailer Seven Eleven’s that uses Cingular’s GSM network . The company is following in the foot steps of Virgin Mobile, and Boost Mobile, which have proved the concept of MVNO works. The private-label wireless market could be worth as much as $6 billion (3.3 billion pounds) a year by 2009, when it could have room for as many as four branded U.S. services with 5 million to 10 million customers each, Yankee Group analyst Roger Entner told Reuters. Virgin Mobile CEO Dan Schulman is not too worried about the competition and warns that new entrants would have to lose money for two years at the very least if not more. Typical cost of setting up a MVNO is about $400 million dollars. “The more handsets you sell early on, the more cash you spend that is not covered by enough revenue,” Schulman said. Yankee’s Entner thinks MVNOs still can be profitable. Typical large operators have a gross profit margin of between 50 percent to 60 percent, whole MVNO can get 30 percent to 40 percent. Al Delattre, a partner at consultant Accenture, told Reuters that the U.S. market could support as many as 40 types of narrowly targeted mobile services, with themed phones that deliver everything from recipes to business data. But then most often than not, Accenture folks are off target!

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Daniel Armstrong

Upon what basis is this statement – “Typical cost of setting up a MVNO is about $400 million dollars.” – ? I would argue this point strongly, with no iffense intended.

I think that there are dozens of different permutations possible, and with different price points, equity deals, etc. I’ve been involved with setting up a number of MNVOs for considerably less investment, from all parties invovled.


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