Raymond Yu
Sonopia goes into MVNO hibernation
Last week, Sonopia, a US MVNE, significantly scaled backed its operations. News reports state that it now has no US employees in its headquarters in California and has halved its staff count in its development centre in the Ukraine to around 30 staff members. Currently it continues to offer mobile services for its existing customers, but Sonopia's web site is not accepting new customers. However, founder Juha Christensen has stated that Sonopia is not shutting down. Comment: Sonopia's announcement follows a turbulent few weeks for US MVNOs. Voce and Movida have both filed for Chapter 11 bankruptcy and even Virgin Mobile (the second largest US MVNO) fell short of meeting market expectations in its 2007 annual results (see EuroView Daily, March 17, 2008). We highlighted in our report 'Tough times ahead for US MVNOs' in January that US MVNOs should expect a tough ride in 2008, particularly with the US economy slowing. Sonopia's business model is unique. It not only targets companies and new start ups, but also allows any individual or society to set up MVNO operations (through a revenue sharing scheme). This undoubtedly differentiates it from other players in the US mobile market. However, despite the fact that it has launched over 4000 MVNOs, known as Sonopias, we assume that it has struggled to achieve the revenues it expected. We suspect that many of its launched Sonopias are very small, consisting of fewer than 50 subscribers, which means the impact on the bottom line is also very small. Therefore, it makes a lot of sense for Sonopia to reduce its operations. There are still many small MVNOs in the US targeting very niche segments and these are in the weakest position moving forward. Hence we expect more MVNO exits in the US mobile market throughout 2008 and 2009.
