From the takeover release it states it will enable the company to explore other telecommunication areas and overseas markets where MVNO businesses are yet to be established.
Found an article that might be of interest:
Virtual realities
A Telephony Staff Report
Apr 9, 2007 12:00 PM
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Comeback stories are an integral part of the sports mythos. ESPN just never expected its branded mobile service would become one, too.
When the self-appointed “Worldwide Leader in Sports” launched its mobile virtual network operator (MVNO) service, Mobile ESPN, during Super Bowl XL in February 2006, expectations were off the charts. Because the ESPN brand is synonymous with sports multimedia in the collective mind-set of the young, male demographic the service targeted, the promise of exclusive video, news and fantasy sports updates delivered anywhere and anytime — the bar, the gym, even the ballpark — seemed like a can't-miss proposition. But despite heavy promotion via the media giant's multiple cable television outlets, its ESPN.com Web site and ESPN The Magazine, parent company Walt Disney benched Mobile ESPN just seven months later, citing slow subscriber uptake and intense competition from rival providers.
Mobile ESPN resurfaced this past February, now as an exclusive sports information and content channel on Verizon Wireless' Vcast mobile video platform, but the failure of its previous incarnation remains a potent reminder of the perils of the MVNO market. The projections are still lofty: In January, market analysis firm Juniper Research forecasted the total number of global MVNO subscribers will increase from around 93 million in 2006 to almost 352 million by 2012, with MVNO revenues in turn rising from $15 billion in 2006 to $67 billion by 2012.
Yet the truth is that most MVNOs are still struggling to simply break even. According to Korean carrier SK Telecom, Helio — the U.S. MVNO it launched in partnership with ISP EarthLink — is expected to report losses between $330 million and $360 million in 2007, despite a subscriber base anticipated to grow to 250,000 by year's end.
Salil Mehta, executive vice president for ESPN Enterprises, said the market dominance of established national carriers like Verizon Wireless and AT&T/Cingular was the primary reason Mobile ESPN faced such rough sledding in its previous life as an MVNO — and, by the same token, why he expects the service to now flourish as a mobile content application available on Verizon's deck.
“It was much more difficult than we expected to communicate what made [Mobile ESPN] so compelling,” Mehta said. “You have to give consumers a compelling reason to switch carriers. Everyone thought that number portability would cause churn rates to skyrocket, but the reality is that there wasn't a compelling reason to switch. Carriers introduced family plans and cut costs — they used their subscriber numbers to their advantage. In the case of Mobile ESPN, it wasn't just about a particular user switching phones. Without their families and friends switching their phones, too, they couldn't get the same deals on pricing.”
But Matt Johnson, CEO of mobile virtual network enabler Visage Mobile, said reports of the MVNO model's imminent demise are greatly exaggerated. “The fundamentals of the MVNO market are good,” he said. “Businesses need to grow and build and carve out a niche in the marketplace. Most MVNOs haven't even been live for twelve months. We're not talking about a retail product like an iPod. It's a business model. If you look at MVNO [average revenue per user] totals, they're phenomenally high.
“MVNOs want to grow a profitable subscriber base. They don't play all the games carriers play, like giving away phones and dropping ARPU.”
According to Johnson, the future of MVNOs hinges on pinpointing defined consumer demographics with clearly differentiated services. Case in point: kajeet, a new pay-as-you-go service created expressly for tweens (in particular, kids ages 11 to 14) and their parents.
Even though kajeet targets a demographic too young for driver's ed, it must still surmount the customer acquisition obstacles dogging rival MVNOs. Daniel Neal, kajeet co-founder and CEO, said roughly half of the U.S. tween and young adult population are already mobile subscribers, most thanks to family plan options.
“Customers are smart, and they can perceive the value of the family plan isn't always there,” Neal said. “It's a plan more for Wall Street than for Main Street. It forces customers to do certain things they are less and less comfortable with. It's already driven a lot of users over to pay-as-you-go.”
If nothing else, the infusion of new blood like kajeet, DDI (a health care-focused service founded by communications acquisition and development firm Hathaway Corp.) and Picante Movil (a service targeting the fast-growing Latino sector) guarantees the MVNO market isn't disappearing anytime soon.
“The perception is it's expensive to get into this business, but we're getting brands into the marketplace for a low cost and proving MVNOs can be profitable at 25,000 or 50,000 customers,” Johnson said. “It's no longer a roll-the-dice, all-or-nothing play. More and more brands want to build a distribution channel to the end customer, and they're realizing wireless is the best way to do it.”
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