Classroom Companion: Business

 
Chapter 5 · Digital Market Evolution

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At some time after the MVNO entered the market, the two MNOs and the MVNO 
have one million subscribers each generating 1000 money units each; that is, MNO1 
and MNO2 have both lost 0.5 million subscribers to the MVNO. Suppose next that 
the rent the MVNO has to pay for using the network of MNO1 is 500 money units per 
subscriber, then the revenues of MNO1 will be 1 billon from own subscribers plus 0.50 
billion from the MVNO; that is, the revenues of MNO1 is 1.5 billion money units. The 
revenues of MNO2 are 1 billion money units.
Compared to the situation that existed before the MVNO entered the market, the 
revenues of MNO1 have stayed the same, while the revenues of MNO2 have become 0.5 
billion money unit smaller. This simple example shows that even if the MVNO is win-
ning many customers from MNO1, housing the MVNO may still be a good business for 
MNO1 since a large proportion of the revenues of the MVNO is fed back to MNO1 in 
the form of network leases. Some of these revenues are revenues lost by MNO2 to the 
MVNO. The result is that MNO2 always loses both market share and revenues.
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5.6 
 Conclusions
Telecommunications was a monopoly business up to about 1985: the operator 
owned and sold or rented out the user equipment, owned the network, and offered 
all services available on the network. Thereafter, it took about 10 years until the 
Market share
Revenue share
MNO1
MNO1
MNO1
MNO2
MNO2
MNO1
MVNO
MVNO
MNO2
MNO2
Before MVNO
entering market
After MVNO
entering market
. Fig. 5.5 Market shares and revenues for mobile network operator (MNO) 1 and 2 and mobile 
virtual network operator (MVNO). (Authors’ own figure)