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Stephen Lodge Shares Insights on MVNO Wholesale Agreements
March 5 , 2025|Corporate, News, Technology
Written by Stephen Lodge (Partner)
In my 25 years since joining Virgin Mobile UK upon launch as the world’s first mobile virtual network operator, the MVNO industry has evolved significantly.
Many MVNO/ reseller wholesale models now exist – branded reseller, B brand, joint ventures, MVNOs with light, enhanced or full technical set ups – plus, a variety of potential third-party provider options to support the MVNO ecosystem (MVNEs, MVNAs, providers of specialist products, technologies or solutions, often on a SaaS model, and so on).
Yet ever-present has been the critical importance of the wholesale relationship between the MVNO or reseller and the host network operator (host MNO) – and the agreement that records that relationship.
A fit-for-purpose wholesale agreement is an absolute “must” for an MVNO, not least as it provides for a mission-critical supply of services, accounts for a majority of an MVNO’s costs and sets the wholesale pricing model and other terms that dictate the MVNO’s retail price competitiveness.
However, the negotiation process need not be prolonged or confrontational: an appreciation of both parties’ key drivers and a pragmatic, constructive negotiation approach often ensures a swift and successful conclusion.
At KLME we have significant experience of advising on all forms of MVNO and B-brand transactions, having driven over 20 successful launches and five host network migrations, across the GCC, North and sub-Saharan Africa, UK, USA, Australia, South Africa, many EU countries as well as various Latam and Asia-Pacific countries.
Supporting this track record is our in-depth knowledge of MVNO technical and pricing models and underlying telecoms regulatory structures, significant experience in negotiating fit-for-purpose wholesale and ancillary agreements and experience in navigating real-world pitfalls in launching or migrating MVNOs.
1. An optimal wholesale agreement is contextual. There is no one cookie-cutter precedent. The “must-have” agreement terms vary from deal to deal and are a product of a careful assessment of the wholesale commercial model, the MVNO’s technical and operational capabilities, the business model and risk attitude of the MVNO and the underlying regulatory framework.
2. Term. Over the decades, the security of tenure of a longer term has given way to the flexibility and potential leverage of a shorter commitment. Typical terms now seem to be three to seven years. The MVNO’s technical and migration capabilities and the wholesale competitiveness of the national market are inputs into this calculation.
3. Exclusivity and/ or minimum purchase commitments. The optimal structure will be context specific. A “light” MVNO heavily dependent on the host MNO for service delivery and technology may view exclusivity differently from a “full” MVNO who has invested heavily in platforms and other resources which facilitate easier migration and perhaps even dual-sourcing. In all cases, very precise drafting is key: what does exclusivity mean and what is its scope. Carve-outs may be necessary. The interaction with other clauses must be considered: it may not work for example, to be exclusive for a service the MNO is not obliged to supply. Careful too, of local legal and regulatory interpretations of the extent of exclusivity, even outside of the EU: I’ve seen unintended restrictions such as prohibitions on sales of MVNO’s customer base for example.
4. MVNO launch. Pre-launch implementation and testing must be scoped with the host MNO and respective obligations, timelines and remedies considered. Sometimes also, the MVNO may experience delays or disputes with other industry operators – the MVNO’s future competitors – in the implementation of cross-industry arrangements (such as interconnection and number portability). The host MNO – and hopefully the regulator – are the MVNO’s friends here but regulatory interventions by the MVNO may be needed.
5. Services scope is key. An MVNO should consider future-proofing commitments from the host MNO around minimum network coverage and technology evolution; specified day 1 services and future roadmaps; the scope and timing of launch of new services or technologies; change and withdrawal rights; service quality and non-discrimination; and wider issues around utilisation of non-MNO inputs, bundling and convergence. A greater dependency on the host MNO’s technical and operational capabilities may require more comprehensive contractual drafting and protections for an MVNO.
6. Pricing model. Cost plus, retail minus, capacity based, revenue share – each can present its own risks and opportunities and require a different drafting emphasis, in areas such as future proofing price mechanisms for example. Detailed and clear drafting will minimise disputes. Payment terms, payment security and remedies/ dispute resolution processes are also much-thumbed elements of the agreement.
7. Remedies for breach. Careful analysis is key given the MVNOs’ service dependency on the MNO, but also for MNOs in respect of key clauses such as exclusivity and non-payment. MVNOs should consider whether remedial measures and a right to terminate the contract (and/ or exclusivity) and claim damages in major breach scenarios such as service quality issues are sufficient or whether more complex service credit regimes for example are required. Can a service element be supplied by a third party or is the MVNO effectively tied to the host network operator for its service provision, perhaps exclusively? If loss of profit is the most likely head of loss, negotiation of an appropriate structure and careful analysis of liability limitations (and carve-outs) and the regulation of such limitations by underlying law is required.
8. Exit/ migration. Migration plans, MNO dependencies, regulatory requirements and dispute resolution procedures should be identified – and drafted in detail – during the initial contract negotiation. Disputes on the way out are not uncommon!
9. Local law and regulation. Consider how the choice of law and dispute resolution clauses impact the interpretation and enforcement of contract terms. In some countries, for example some GCC countries, key clauses such as term, termination, exclusivity and liability may be significantly impacted by local law or regulation.
10. How can we help? At KLME we have significant experience of advising on all forms of MVNO and B-brand transactions, having driven over 20 successful launches and five host network migrations, across the GCC, North and sub-Saharan Africa, UK, USA, Australia, South Africa, many EU countries as well as various Latam and Asia-Pacific countries.
Supporting this track record is our in-depth knowledge of MVNO technical and pricing models and underlying telecoms regulatory structures, significant experience in negotiating fit-for-purpose wholesale and ancillary agreements and experience in navigating real-world pitfalls in launching or migrating MVNOs.
