Ultimately, recovery is inevitable in the hard-hit mobile phone sector, butthe pressing question is: how soon is it likely to happen?

Poor old Vodafone. The shares of the world's largest mobile phone group, dipping under the £1 level earlier this month, are in danger of becoming a "penny stock". Its once high-flying chief executive, Sir Christopher Gent, is being mentioned in the same breath as Bernie Ebbers, former chief executive of WorldCom and the imperilled Jean-Marie Messier at Vivendi Universal. Its battery is flat; its ring-tone out of tune.

But Vodafone is merely the bell-wether for the mobile phone sector as a whole, consigned by debt, market saturation and declining average revenues per subscriber to the bottom of a business cycle of uncertain periodicity.

Recovery, however, is inevitable. Communications, both voice and data, will increasingly take to the airwaves and the prospects for the wireless business are sound - in the long term, at any rate.

But with no way of determining when the upturn will materialise, a key question for operators is how to maximise traffic now and in the immediate future on their often expensively acquired networks to generate cash flow, pay down debt, and keep investors happy.

Most have - or will have - large amounts of spare capacity. GSM operators transmitting in the 800-900Mhz (megahertz) band may be already squeezed, but those operating at 1800Mhz can accommodate huge increases in traffic volume. And in Europe at any rate, most big operators now own chunks of spectrum around the 2.1 gigahertz band ready for the deployment of next generation services and giving them more than enough capacity.

With mobile phone market penetration close to saturation in most European countries, operators are already attaching more importance to securing higher revenues from existing customers than seeking to extend their subscriber base still further.

They are not, however, well-equipped or qualified for the task. Mobile network operators are generally excellent at building and operating mobile networks. But - despite a few exceptions - they are not well recognised for their skills in customer care and attention, branding or, in the case of business customers, process design and systems integration.

The conclusion is that they will have to seek partners with these skills if they are to find new and innovative ways of persuading customers to part with more of their money.

These partners could come in various forms, but the success of Virgin Mobile, which managed to notch up 1m customers in only 19 months, has focused attention on the so-called mobile virtual network operators (MVNOs). Even Vodafone, initially an MVNO refusenik, seems to be warming to the theme.

It is possible to waste a great deal of time and space discussing the exact definition of an MVNO. For all sensible purposes, it means a company that offers mobile services under its own name but does not own its own radio network, whether or not it operates a switching centre. Virgin Mobile, for example, runs its services in the UK using the network of Deutsche Telecom's T-Mobile, formerly One2One.

Meanwhile, British Telecommunications, which spun off its mobile operations as MMO, now intends to become an MVNO in its own right, using its former subsidiary's network.

The principal advantage from the network operator's point of view is the increased traffic across the network for no investment of capital or management resource. T-Mobile would have been unlikely to have proved as attractive as Virgin in attracting new customers to its UK network.

An ideal MVNO offers a strong and attractive brand, marketing acumen, a large customer base, billing and customer care systems in place and a prospect of compelling content. A gas or electricity utility has customers and systems; a football club has a brand, niche customers and content - supporters would be prepared to pay for news flashes and video replays.

Spinbox, a Swedish group which enables companies to become MVNOs by taking responsibility for negotiations with operators, management of network facilities and so on, says its customers can break even with only 3,000 to 5,000 subscribers compared to the perceived wisdom of 40,000 to 100,000.

Expect, then, a rush of MVNOs over the next few years. The danger is that subscribers will be confused by the variety of services on offer, just as there was confusion over cut price fixed line services in the aftermath of market liberalisation. Consumers, however, are becoming used to taking services from unlikely suppliers: Royal Shakespeare Company Mobile, anyone?

EMAIL THIS PRINT THIS MOST POPULAR