Blog Post

Easy Come, Easy Go

Chalk another on the board for the MVNO fallout. EasyMobile, the mobile service created by the crew behind Europe’s bright-orange “Easy” brand–EasyJet, EasyPizza, EasyMoney– is closing its service in the Netherlands after just 9 months. Well, as they say–easy come, easy go. Or as Om says, “Not-So-Easy Mobile.”

It’s an indictator of how crowded the MVNO market in certain markets has become, and could be a warning sign for the U.S., with its current MVNO gold rush mentality. Last year Stelios Haji-Ioannou, the easy brand founder, was the poster child of Europe’s MVNO wave, speaking at big wireless industry conferences. Though, he didn’t own or run much of the mobile move, it sounded like a good idea at the time. Take a well known brand that is known for cheap and “easy” and sell wireless service to consumers that want no-frills calls.

But even then, the Netherlands market, one of the birthplaces of the MVNO model, was getting increasingly full. By some estimates the market has over 30 MVNOs already, and basic low-cost services like Simyo are the standard. Across Europe the MVNO count is likely higher than 100. That includes the more niche services that have cropped up like Call-4-Care, a do-gooder branded MVNO that gives part of its proceeds to non-profits, Denmark-based Gaymobile, PePtalk, for Dutch pot smokers, and Al Yildiz for Turkish subscribers in Germany. This site has a growing list of current, shut down and speculated MVNO’s. All in all the global MVNO market is touted at close to $11 billion by analysts.

In the U.S., the MVNOs are going after media-content and 3G data services. That means more of an invesment and higher fees for subscribers, and Amp’d, Helio, and ESPN Mobile, are all looking to sell mobile data to bring in a higher average revenue per user. Amp’d is one of the most well-funded wireless companies in recent years, with $260 million from investors like MTV, Qualcomm, Intel Capital, Highland Capital Partners and Redpoint Ventures. You might recognize Amp’d’s founder, Peter Adderton–he founded Nextel’s Boost and is trying to do it again with Amp’d.

The U.S. services haven’t fared half as well as all the hype. ESPN dropped its prices recently, and its move to sell its mobile service on its TV channel looked like desperation. Amp’d is rumored to have started to change its strategy significantly after bringing in only several thousand subscribers. Then there was that “Helio has only 100 subscribers” rumor, but the companies publicly denied it.

Actually with that last rumor in mind, it has become a bit in-fashion to diss MVNO plays. Though, if the U.S. MVNOs are getting more subscribers then they are letting on, you’d think they would be the first ones to shout it out. At the same time the MVNOs could very well become the disruptive mobile networks that Amp’d’s Adderton likes to claim, stealing market share from the carriers–he likes to position Amp’d as the MTV of the mobile generation. But the services will take a good long while to bring in loyal paying subscribers, and that means not a lot of money will flow from the investment any time soon. And we all know how VCs hate to wait!

10 Responses to “Easy Come, Easy Go”

  1. Okay, full disclosure, I am a huge Easy fan, and think Stelios is a genius. Plus, I like the color orange.

    But, the way I read the Reuters article is that EasyMobile is just shutting down in the Netherlands, but will continue on in Germany and Britain (unless I misread). So, is the MVNO business dying, or is Easy just being smart by getting out of one saturated market?

  2. Mobile Comentator

    MVNO services are suffering from the same problem that hampered the growth of broadband over several years in many countries: unattractive economics. The MVNO model is simple: purchase data and minutes from an incumbent for a “low”cost and then resell on to customers, usually by proposing “attractive” value added services. The problem is that the wholesale prices charged by incumbents to MVNOs are too high (they want ensure they don’t lose their most attractive customer segments, those on monthly price plans). MVNOs subsequently have a hard time amortizing their significant marketing costs that is necessary to gain traction. Ultimately, I believe that few MVNOs will succeed – perhaps some services aimed at high-end users (with a high ARPU) may have a chance.

    IMHO, ultimately the biggest risk to incumbents – and greatest potential for newcomers – may come from WiMax/Wifi enabled phones. Dual phones are already hitting the market in some countries, and once the technology nits have been hammered out, it should be cheap(ish) for newcomers to set up city/state/country-wide.

  3. Sriram,
    Carriers are making good money on their enterprise customers and they can sell to them efficiently. Why would they wholesale capacity to MVNO who will go after their best customers?

    Carriers are allowing MVNO’s to happen so that MVNO’s can go after customers they can’t acquire efficiently.

  4. I bought a Helio Kickflip the same day that the company launched, and for more than two months the idiots there couldn’t figure out how to activate my phone. Now I returned the phone and got a Blackberry 8700c and it’s a lot better.

  5. Jesse Kopelman

    Sriram, I don’t think the US carriers have the network capacity to support their own corporate plays and MVNO going after the same market. What this argues is an alternative network built data-centric from the ground up. Perhaps Sprint’s eventual 2.6 GHz play?

  6. sriram bala

    Instead of chasing a miniscule demography of the consumer market, if these MVNOs refocused on the enterprise customer, they would have better acquisition rates. Give an enterprise customer plenty of wireless bandwidth, a fat pipe, and a series of applications to choose from, and he will sign up. Content providers need to think beyond email and IM. What if launched an MVNO, and let you pick and choose applications on the device?