Excerpt from the Pyramid Research report  MVNOs and MVNEs: Analyzing the Viability of Virtual Mobile Players .

The MVNO business model is successful when a company enters the mobile market, and acquires and services specific market segments more cost-effectively and profitably than a mass-market wireless carrier could.  To be profitable, MVNOs have to achieve one of the following:

• Increase ARPUs above levels recorded by mobile network operators (MNOs);
• Slash average costs below levels recorded by MNOs;
• All of the above. 

In practical terms, the MVNO has to improve one or more of the following wireless operating metrics to be profitable: CPGA (cost per gross acquisition), CCPU (cash cost per user ), ARPU and churn. The traditional MVNO model has long been a cost story, with the MVNO venture focusing on reducing CPGA, CCPU and churn, and anticipating lower ARPU levels mainly as a result of its subscriber base profile.  

Bringing down CPGA: the case against handset subsidies

The cost per gross acquisition is a key cost element for MNOs, and understandably, a much-targeted area for MVNOs seeking to slash costs.

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