The MVNO Shake-Up: AI, eSIM, FinTechs and the New Rules of Success

Today I'm bringing you a Q&A interview with Christoph Uferer, Partner at Arthur D. Little. He specialises in the telecom sector, with particular focus on MVNOs and mobile virtual network operators.

Christoph and his colleagues at Arthur D. Little recently released their viewpoint Riding the MVNO Wave: 10 Keys to Success, exploring how regulatory tailwinds, digital innovation, and lean operating models are driving growth for MVNOs globally. If you're at all interested in the MVNO dynamics of the marketplace, I think it's a very helpful read – especially if you've been working in or tracking the sector.

I wanted to expand on the points they made in the report – so I am grateful for Christoph taking the time to address answer them.

Over to you Christoph - my questions are in bold:

The report mentions that for every MVNO that succeeds, five fail and 50 don't even get off the ground. What separates the winners from the losers in this ultra-competitive space, and are there early warning signs that predict failure?

The "must-have criteria" are indeed strong predictors. Ultimately, many MVNOs fail because they lack a clear network access strategy; in a business with very thin margins, only those who deeply understand their customer demand (data, minutes, etc.) can run sustainable operations. The space is full of serial entrepreneurs, and those not launching their first MVNO clearly have an advantage.

The report suggests that AI-based demand forecasting combined with bulk buying can reduce wholesale costs by up to 70%. Can you walk us through a real-world example of how an MVNO achieved these savings, and what specific AI techniques are proving most effective?

Let's start with bulk pricing: many MNOs are hesitant to work with new MVNOs - especially those without a strong underlying brand - because they see high effort with limited return. Accordingly, they often price their wholesale offering so that even small volumes become somewhat viable. If MVNOs commit to a minimum volume, we typically see price reductions of 30–40% compared to pay-as-you-go rates.

On top of that, AI-based demand forecasting can further optimize outcomes. By analyzing historical user data, MVNOs can better structure their data packages to maximize the utility of their wholesale agreements, and increase ARPU through targeted upselling, driven by predictive insights.

Many traditional MNOs are now launching their own MVNO-style sub-brands. How should these operators balance cannibalizing their core business versus competing effectively in the low-cost segment? What lessons can they learn from pure-play MVNOs?

In short: someone will disrupt the market. By launching their own sub-brands, MNOs keep pricing power in-house and capture the entire value chain. Typically, they target lower-priced segments they don't want to address with their main brand, thereby preserving the "premium" positioning of their flagship offer.

As for lessons from pure-play MVNOs: these players typically bring agility and deep knowledge of specific niches. Many operators could benefit from adopting this mindset.

You cite examples like Galatalk targeting football fans and Fliggs Mobile rewarding users with cryptocurrency. Beyond these niches, what untapped customer segments or value propositions do you see emerging in the next 2–3 years?

We see strong momentum around MVNAs (Mobile Virtual Network Aggregators). The combination of eSIMs - enabling instant access - and the ability to launch a white-label MVNO within weeks as an adjacency to an existing business is already shaking up the market. Fintechs like Revolut are entering this space, and we expect further traction in industries such as travel, hospitality, and retail, where mobile connectivity enhances customer stickiness.

The rise of eSIM technology is enabling new types of MVNOs like Airalo for international travelers. How is eSIM changing the MVNO playbook, and what other technological shifts could similarly disrupt the market?

The physical retail interface is becoming less relevant as more customers prefer to select their mobile offering digitally, often with just a few clicks on their phone. With strong growth in eSIM adoption, this trend will only accelerate. While there is still a meaningful share of customers who value personal, in-store activation, the competitive advantage of physical distribution is clearly eroding.

The report emphasizes the importance of MVNEs (Mobile Virtual Network Enablers) for lean operations. Should MVNOs view complete outsourcing as the end goal, or are there critical capabilities they must retain in-house to remain competitive?

It depends on the MVNO's differentiation strategy. If an MVNO differentiates through technology - such as a proprietary UX or data-driven features - outsourcing core capabilities is not advisable. However, if differentiation is primarily brand- or value-added-service-driven, then relying on COTS (commercial off-the-shelf) offerings often makes sense. These benefit from economies of scale and faster feature development than what most individual MVNOs could build in-house.

With network traffic costs varying widely and dynamic pricing becoming more common, how should MVNOs approach negotiations with host MNOs? What leverage points beyond customer volume can they use to secure better rates?

There's no universal playbook here—it's highly context-dependent. Smart MVNOs consider how they can complement the host MNO's positioning, how to present themselves as partners rather than threats, how to articulate a credible growth strategy that makes the opportunity worthwhile, and how to integrate seamlessly with the host's systems to minimize operational burden. These factors, beyond pure volume, can meaningfully improve negotiating outcomes.

As 5G networks mature and data consumption patterns evolve, how will the economics of the MVNO model need to change? Will the current lean, low-margin approach remain viable?

It remains uncertain. We see some flattening in data consumption growth, though this could be temporary. ARPUs continue to decline across the telecom industry, not just for MVNOs. At the same time, new entrants may treat connectivity as a "free" adjacency, monetizing elsewhere (e.g., via credit card transaction fees). This raises questions about the long-term viability of standalone low-margin models.

Given the intense competition and slim margins, do you foresee consolidation in the MVNO space, or will we continue to see a proliferation of niche players? What would trigger a wave of M&A activity similar to T-Mobile's acquisition of Mint Mobile?

Among MVNOs themselves, large-scale consolidation is harder to imagine. However, MNOs may continue acquiring MVNOs that pose a potential threat to their core business. We expect operators to strike a balance: keeping competitive tension in the market while selectively absorbing disruptive players.

Finally, with financial service players (Revolut, Nubank, Monzo's rumoured UK offer) entering the space, what's your view on the mobile opportunity for banks and fintechs?

We believe the opportunity is highly significant. Providing connectivity not only increases customer stickiness but can also enhance security in financial transactions. For fintechs and banks, mobile connectivity can become a powerful adjacency to their core offerings.

Thank you for taking the time, Christoph.

You can find the report right here and connect with Christoph on LinkedIn here and find his company profile here.