The term stands for ‘mobile virtual network operator’. The ‘virtual’ part of the term is crucial to defining what it actually is.
Typically you would not expect such an operation to own base stations (towers) or the technology (wireless backhaul) and systems linking these from the subscriber using their handset to the completion of their request (such as calling or texting).
Further to this, they tend not to own licensed spectrum frequency either (in some instances the start up may have already bought a license but decided not to go down the MNO route). Their spectrum usage is accessed via their partner MNO (or MVNE) which will have purchased this from a telecommunications regulator or government department.
You will have noted the use of ‘typically’ in referring to what they may or may not possess. In general they will simply exist as companies which using their partners' technology to provide a service offering. However, in many cases they will have in place their own OSS, BSS and back office solutions, and may also have physical hardware, such as switches. Licensing may also takes place and varies in format from country to country. A current example is Saudi Arabia, official documentation for process can be found here: "Request for Applications for Licensing Services in the Kingdom of Saudi Arabia".
A further incorrect assumption is that the sector is only consumer focused solely providing voice and text (SMS/MMS) services. In practice they exist to target any demographic where a wireless service is used to achieve a goal. For this reason 'M2M MVNOs' exist - such instances include telematics and mobile health offers. Kindle's mobile based service is argued by some as being part of this group, although this is really stretching the definition. But making that point you can see how open ended the industry has become.
Provided services go beyond voice and SMS. Many virtual operators offer MMS, international roaming, mobile Internet, mobile content applications and any added functionality which their host network will agree to provide access to or allow as part of the relationship.
Our definition focuses upon the client relationship. Where a company sells a mobile service and maintains the ongoing relationship with the subscriber then this is what matters in our opinion. The seller seeks out a target market (often a niche market), wins subscribers onto its order book, bills them for using the service, conducts marketing activity to them and from the subscribers’ point of view, provides them with the mobile service. This means that resellers can be included in the definition but from the customer’s point of view that reseller is their mobile phone network. This definition does not include a reseller who wins a commission for signing up customers and then hands the client management / relationship over to the supplier.
Generally the principle of having mobile subscribers and no towers is what the industry agrees as fitting the bill. For even more examples of people defining the industry, try these:
#1 Wikipedia: "A wireless communications services provider that does not own the radio spectrum or wireless network infrastructure..."
#2 Orange Switzerland, inviting applicants: "From revenue share models typically used for branded resellers to airtime models."
#3 About.com with a pure version: "...pays wholesale fees for minutes and then sells the minutes at retail prices under its own brand"
... And if you would rather just watch a YouTube video and have a Canadian child explain the industry, then here you go: