Ten Years Later, Are MVNOs Still Lost in the Labyrinth?

In Jim Henson’s cult classic film the Labyrinth (The Labyrinth Trailer), a young girl named Sarah (starring Jennifer Connelly) must traverse an ancient maze to rescue Toby, her baby brother, from the villainous Goblin King, Jareth (brilliantly portrayed by the inimitable David Bowie). Armed with only her wits and a few unlikely, if sometimes reluctant allies, Sarah faces a series of mind-bending challenges and dark deceptions designed by the diabolical Goblin King.

It was in 2014 that, I first compared the treacherous world of MVNOs to the plot of Henson’s iconic film. In evidence provided to the UK’s Competition and Markets Authority during the ill-fated $14.5 billion merger attempt between telecom titans O2 and Hutchinson, the iMVNOx Association issued a stark warning that further consolidation of MNO power would effectively trap the MVNO ecosystem in a dangerous, debilitating labyrinth governed by the unchecked dominance of these Goblin Kings of telco [1].

Sadly, when viewing the power MNOs have over the market today, this cautionary tale has proved to be more prophetic than I originally imagined and it seems to me, it remains an eerily accurate analogy regarding the state of our industry at its core. Since inception, MVNOs have been under a continual threat from consolidation efforts and other forms of pricing squeeze and market manipulation. Power-hungry MNOs, perpetuating monopolistic dominance through anti-competitive practices. Just as Jareth aimed to transform Toby into an obedient goblin, carriers across the world, still today, seem determined to homogenize the diverse MVNO landscape into one governed solely by their own rules.

So, the question remains: ten years later, are MVNOs still lost in the Labyrinth, or have they simply been negotiating in circles; cycles of dead ends and misdirection? Has it all just been one obstruction after another – orchestrated at every turn by the masters of control: the Goblin King mobile network operator.

To begin to shape an answer to the questions posed above, let’s take a quick look at the state of the MVNO industry today.

On the face of it, we seem to have made some progress; according to research by the GSMA, the global MVNO market is projected to reach $73 billion in revenue by 2025, growing at an impressive CAGR of 7.1% from 2020-2025 [2]. And in reality a handful of MVNOs have managed to carved out a significant niche, demonstrating remarkable resilience. MVNOs like Kajeet have thrived through disruption, delivering innovative services tailored to underserved communities, while others such as Lyca Mobile have leveraged their single-minded profit focused strategy to persevere.

“Through dangers untold and hardships unnumbered I have fought my way here to the castle beyond the Goblin City… for my will is as strong as yours…You have no power over me!” – Sarah (MVNO)

“So, the Labyrinth is a piece of cake, is it? Well, let’s see how you deal with this little slice…” – Jareth (MNO)

But just as Sarah loses allies during her quest, there have been many casualties over the past ten years for the MVNO market as well. Take ESPN Mobile – with all the reach of their parent company effectively failed to launch, unable to make the model work despite their market share. Or more tragically, market pioneer Ovivo Mobile, who discovered the mobile-marketing shortcut through the maze and were systematically eradicated, dipped in the Bog of Eternal Stench, lest others try to follow their lead.

Even the great challenger brand Virgin Mobile, still hanging on in LATAM and the UAE as a full MVNO, continues to face an identity crisis across the globe. In the UK, in June 2021, Virgin (the world’s first MVNO) was ‘merged with’ and then shuttered by O2, in a brilliant example of the classic buy-to-kill strategy loved by so many carrier groups.

An acquisition model that Virgin Mobile are unfortunately familiar with; having first been purchased in the US by Sprint in 2009, and then “merged” or rather – discontinued – and then their subscribers “merged” with Boost Mobile in 2020, upon T-Mobile’s acquisition of Sprint.

Two different markets, nearly a decade between them but in the end, it’s the same play.

A favorite trick of the Goblin King trade, a slight of hand. Turn full MVNO into sub-brand. The controversial solution that combines the illusion of competition with all the benefits of complete control.

Now ask yourself: is this what fair market access truly looks like?

Regulatory bodies like Ofcom, the UK’s telecommunications authority, have certainly made efforts to keep the market open. Ofcom’s 2020 report on supporting the UK’s MVNO sector highlighted key issues like negotiating fair wholesale access agreements as being “too difficult and too costly” for MVNOs (including insight from the iMVNOx industry best practices, published back in 2016) in an effort to structure more reasonable terms. The FCC in the U.S has also taken action and delivered interventions aimed at promoting MVNO competition, including provisions for MVNO access in their 2018 Spectrum Frontiers proceeding.

Globally, the GSMA forecasts that MVNOs will account for over 8% of total mobile subscriptions by 2025, up from around 6% in 2021 [2]. According to the MVNO Intelligence & Operations report, the leading MVNOs were projected to grow 50-55% between 2022-2024 in terms of the number of active MVNOs.

Yet these gains seem relatively modest when you consider the following:

• Consolidation and MNO dominance remain the norm in major markets like North America. Out of a total wireless subscriber base of 472 million in 2019, only about 23 million were MVNO subscribers (less than 5%) according to analysis by Tutela [3].
• In Europe, the top four MNO groups controlled a staggering 82% of the total subscriber market as of Q4 2020, leaving little room for MVNO disruption.
• Globally, a mere ten carrier groups account for almost 3.3 billion of the world’s wireless subscribers. That’s more than 40% of the global total [4].

“She should not have gotten as far as the oubliette; she should’ve given up by now…The dwarf’s about to lead her back to the beginning. She’ll soon give up when she realizes she will have to start all over again. Ha ha ha… well??? Laugh.” – Jareth

I, for one don’t find it funny and remain worried that many key stakeholders are still trapped in some Bowie-induced hallucination. Only if we break the spell will we be able to see that these efforts have, failed to prevent, the deeply destructive and often invisible maneuverings of the all-powerful MNO overlords. If anything, I fear that in the past decade MNOs have only grown bolder and more insatiable in their ‘goblin-esque’ appetite for consuming competitors – no matter how quirky, creative, or beloved those secondary brands may be among customers.

Consider the situation in the U.S. market.

T-Mobile’s $26 billion acquisition of Sprint was completed in 2020, significantly consolidating their market power [5]. This was despite the deal drawing significant opposition, including that from the Communications Workers of America labor union which argued it would “endanger democracy, economic opportunity, and competition.”

Unfortunately, Sprint would hardly be the ravenous T-Mobile’s final meal.

In 2022 T-Mobile followed up that first mega-deal by making headlines again, this time with a movie-star twist when purchasing budget MVNO brand Mint Mobile for a staggering $1.35 billion. Mint, owned by actor Ryan Reynolds and partners, had been lauded for disrupting the industry through its affordable pricing, irreverent branding, and overall “Un-CEO” ethos of putting customers first [6].

Will their scrappy philosophy continue to thrive from within T-Mobile’s well-established corporate culture? Will the disruption be welcomed and supported by T-Mobile’s shareholders?

Only time will tell, but I doubt Virgin would take that bet. I know I wouldn’t.

Certainly, Reynolds and company pocketed a windfall and kudos are deserved to the team at Simple Mobile who dreamt up this fantasy in the first place. This sale with its massive publicity and its billion-dollar valuation of a virtual network, could have had a positive impact on the MVNO market; yet many industry watchers decried the sale’s impact on competition and consumer choice. Of course, Lyca Mobile wasted no time filing a petition urging the FCC to block the takeover, arguing the Mint Mobile acquisition represented “a struggle between David and Goliath and the Davids fear that a giant just got even more powerful.”

Still, despite that valiant attempt to fight back, the FCC would ultimately side with Goliath, permitting the deal to proceed over objections of Lyca and others, including past positioning recommended by the iMVNOx Association.

So, ask yourself… how truly twisted must this labyrinth be to take a superhero like Deadpool out of the game and turn Lyca Mobile, with over 16 million subscribers across 23 countries and a reputation for doing whatever it takes, into our damsel in distress?

T-Mobile’s rampant consolidation has raised alarm bells across the industry, with many crying foul over potential antitrust violations and the creation of a U.S. wireless oligopoly. Despite these concerns, in early 2024 regulators allowed this growing global carrier group a third jewel in their crown when they succeeded in acquiring U.S. Cellular’s wireless assets and customer accounts for $1.4 billion, continuing their conquest to eliminate competitors and consumer choice through their walled garden of controlled connectivity.

Yet, for all of T-Mobile’s naked pursuit of monopolistic power, one could argue they are simply embodying the archetypal role of “Goblin King” from *Labyrinth* to perfection.

And who can blame them? Why not keep control if no one will stop you?

[part one] [the MVNO labyrinth series]

Sources:

1. Evidence to the UK’s Competition and Markets Authority (CMA)
2. GSMA projections and reports
3. Analysis by Tutela
4. TeleGeography top telecom groups by wireless subscribers
5. Communications Workers of America opposition to T-Mobile/Sprint merger
6. Mint Mobile acquisition by T-Mobile and related industry reactions