Artilium

Monday, September 17, 2007

Good News For Good Business Models; Tailored MVNOs Reap Success & Receive Funding

Finally, some good news in an MVNO market rocked by failure (case in point: Amp’d Mobile) and dire analyst predictions. Recently, Movida Communications Inc., an MNVO focused on providing prepaid mobile services to Hispanic consumers, announced that a group of new and existing investors had committed $40 million in funding. The move coincided with the news that the MVNO had outpaced even its own projections in terms of subscriber growth, reaching a staggering 250,000 users since its launch in 2005.

How did this particular MVNO manage such a successful track record and reach the growing Hispanic market? A statement from a Movida investor speaks volumes about the company’s formula for success: “Movida has demonstrated a strong ability to build allegiance and loyalty to its brand among Hispanic consumers in a relatively short amount of time.” Read between the lines and it’s clear Movida’s singular focus on the Hispanic demographic, and providing the services that matter most to this niche customer segment, has quite literally paid dividends. Traditionally, prepaid MVNOs may have been profitable on an operational basis but have not proven to be good investments, with subscriber values consistently teetering on the edge because of their sensitivity to churn. But Movida turns this thinking on its head, showing a well-executed mass customization strategy can drive positive results and build customer loyalty.

Another case in point is tween-focused MVNO kajeet, hailed as the first pay-as-you-go mobile service made from a kid’s point of view. Launched just six months ago on the Sprint Nextel network, the company announced last week that it has secured $36.8 million in its second round of funding.

It draws and keeps customers thanks to a unique approach that mixes a refillable prepaid “wallet” of credit specifically tailored for kids with specialized ringtones, games, wallpapers and the usual assortment of cute and customized content. But the key to kajeet’s long-term appeal is its value-add in the form of the so-called kajeet Configurator, which allows users to customize their phones while giving parents parental controls. It appeals to parents with its low cost too: there are no activation fees or contracts, and no flat-rate charges. Voice calls are 10 cents per minute, for instance. In a word, this service in a service lets tweens and teens customize their mobile experience in ways that suit their world while offering their parents comfort about the role mobile technology plays in their lives.Connect the dots and it’s clear that kajeet has created a compelling mobile service package that addresses the unique needs of the large and growing youth segment of the market. It’s also a testament to the critical importance of having the proper platforms to enable the bundling, charging and delivering of differentiated services that match the target demographic.

And here’s confirmation from the competition that really proves the importance of being able to offer converged and customized services. RCR News reports AT&T Mobility has joined the ranks of mobile operators giving parents more control over their children’s mobile usage. (Translated: A mobile operator is following the lead of an MVNO, in this case kajeet.) AT&T Mobility’s new Web-based service aims to allow parents to set usage limits on talk time, text messaging, instant messaging and downloads. AT&T Mobility said that in a recent survey conducted by the company, a whopping 84 percent of consumers indicated that they “believe parental controls and safety tools are extremely or very important in keeping children safe while they use today’s entertainment and communications technologies.” The survey also showed that almost one-third of those adults did not feel they had adequate knowledge of how to use such controls.The examples of Movida and kajeet underline the increasing importance of introducing integrated services on an individual basis to target a well-defined market segment. They also no doubt whet the appetite of users’ more differentiated communications, offering services in tune with their lifestyles and life stages.

But more isn’t better if providing this choice causes the company’s costs to spin out of control. That’s why Artilium’s own value proposition emphasizes a prudent approach that extracts value out of existing networks. The end-game is about mass customization, and providers can best reach this goal if they manage a single infrastructure. This frees resources to deploy new, differentiated and converged services rapidly and with control – precisely the services that will clearly be more in demand moving forward.