Profit and Strategic Analysis for MNO-MVNO Partnership

Abstract: We consider a mobile market driven by two Mobile Network Operators (MNOs) and a new competitor Mobile Virtual Network Operator (MVNO). The MNOs can partner with the entrant MVNO by leasing network resources; however, the MVNO can also rely on other technologies such as free WiFi access points. Moreover, in addition to its connectivity offer, the MVNO can also draw indirect revenues from services due to its brand. In that framework including many access technologies and several revenue sources, a possible partner MNO will then have to decide which wholesale price to charge the MVNO for its resources. This multi-actor context, added to the need to consider both wholesale and retail markets, represents a new challenge for the underlying decision-making process. In this paper, the optimal price setting is formulated as a multi-level optimization problem which enables us to derive closed-form expressions for the optimal MNOs wholesale prices and the optimal MVNO retail price. The price attractivity of the MVNO is also evaluated in terms of its indirect revenues and the proportion of resources leased from possible partner MNOs. Finally, through a game-theoretical approach, we characterize the scenario where both MNOs partner with the MVNO as the unique Nash equilibrium under appropriate conditions.