For the upstarts, costs are important. Keeping those costs down is essential, especially when going up against the gargantuan money pits of Bell, Rogers and Telus.
For Mobilicity, filing down the biggest expense of all is a good idea. That’s why the low-cost mobile operator decided to tap Ericsson to run its networks. The Swedish network maker took over Nortel’s wireless business last year and lets Mobilicity save some money while still receiving top quality efficiency.
This isn’t the first time Mobilicity has paired up with Ericsson. Back in August of 2009, Mobilicity (then called DAVE Wireless) announced that they had brought Ericsson on board to help with the designing and building of their 3G UMTS network. Last fall, the company brought in U.S. customer-services provider Amdocs Ltd. to handle customer service relations and billing issues.
The contract with Ericsson is for five years and puts the company in charge of “front-and-back-office operations as well as field maintenance in Mobilicity’s network.”
While no financial terms of the deal have been disclosed at press time, word is that Mobilicity can shear around 15-20% off of its operating expenses with this decision. That means that the business model of “low cost wireless provider” can stay intact.
With most other companies keeping these sorts of things in-house, it’ll be interesting to see if this approach actually pays off for Mobilicity. They plan to launch before the summer and appear to be getting things in order for an initial Toronto launch.
Mobilicity’s propensity to outsource almost everything in terms of its services puts it in a remarkable position. Many industry analysts think that they could be lining themselves up to drastically and insistently undercut industry prices. By offering ruthless discounts, the company could really stick it to other discount brands offered by the major carriers and could give the other upstarts something to worry about.
Of course, part of the problem with this is that outsourcing does run the risk of keeping technical expertise out of Mobilicity’s loop. In handing over the keys to Ericsson, it’s possible that the move could put them at a competitive disadvantage should their business model develop. It’s also possible that passing the buck on network management by considering it a “non-core job” could turn off some customers by raising concerns about poor customer service and tech support.
In the short-term, however, Mobilicity’s fairly limited business model doesn’t particularly require a dedicated team of technical professionals and this round of outsourcing makes sense to keep costs down. In this day and age where low prices seem to matter more than anything else, Mobilicity appears to be making the right decision.