Vincent Poulbere
NRJ Mobile results raise questions over content MVNO's profitability
NRJ Mobile, a French MVNO on SFR's 3G network, reported 312,000 customers as of 31 December 2006, up from 250,000 at the end of September. In September, NRJ Mobile had a 26% market share of the total French MVNO subscribers.It generated a turnover of €7 million during Q4 2006 and €24.3 million for the full year 2006. Earlier in 2006, it had posted an operational loss of €15 million for the first nine months of 2006.NRJ Mobile is owned in majority by the NRJ Group, a pan-European media group involved in radio broadcasting and music. The group reported a turnover of €396.4 million for the year 2006.Comment: Despite encouraging subscriber acquisition trends, NRJ Mobile struggles with revenues and is expected to face difficulties in making its business profitable this year. Its €7 million turnover for Q4 2006 means that its customers' ARPU has been close to only €8/month during this quarter. In comparison, the average ARPU for the French mobile market was close to €36/month.When it became the first French 3G MVNO in 2005, NRJ Mobile developed a strategy around mobile entertainment, including music and mobile TV, and is now looking to leverage its strong brand especially in the 15-25-year segment. However, it developed in parallel a customer acquisition strategy based on prepaid cards with an unlimited validity period, and signed-up customers with very low monthly ARPU. This may have been good in a low-cost MVNO model, but proved to be a mistake in a value-added services model, which requires important investments in services. NRJ Mobile implemented some changes in its voice tariffs last October to increase ARPU, but is still continuing to focus on prepaid. We'd expect NRJ Mobile to introduce postpaid offers sooner or later to target customers with higher ARPU.The equation is challenging for a content MVNO that wants to develop a differentiated service offering. It needs to acquire customers (i.e. build an audience for its content) with attractive voice tariffs, but at the same time, it needs good margins to finance the implementation of value-added service platforms and development of its content offering. In this context, there is no doubt that the financial support of the NRJ Group will be critical to absorb the costs of building NRJ Mobile's operations in the next months.
