With the influx of foreign workers to the UK, new companies are popping up all over the place to offer services to migrants and foreign nationals. There are already a number of MVNOs targeting immigrants with cheap international calls, such as Lebara, Lyca Mobile, Nomi and Carphone Warehouse’s Talkmobile, and the latest entrant, GlobalCell, was added to the list last week.
At the same time, networks don’t want to lose out on finding new customers in the increasingly saturated market. Orange recently added a new tariff offering low-cost international prepay calls. Meanwhile, 3’s Skypephone proposition, which offers free unlimited international calls, has been very popular, according to the operator.
Figures from the Office of National Statistics for 2007 show that 5.6 million people who live in this country were born outside the UK. Lebara estimates that the total number of people who frequently call abroad is eight million. But these figures may not be big enough for the increasing number of companies targeting the same demographic.
Shaun Collins, analyst at CCS Insight, says: ‘It is a challenging segment because it’s so small. The question is: are these segments big enough to sustain such specific propositions?’
The latest entrant, GlobalCell, believes it can bring a more compelling offer to the market by further drilling down on the demographic and focusing on migrants from Eastern Europe, which the company estimates to be two million.
None of the ethnic MVNOs disclose customer figures; it is only Lebara that says it has 600,000 subscribers across all of its seven countries in Europe.
One of the biggest challenges for these relatively small MVNOs is to secure sufficient retail presence for their Sim cards and top-ups. Local shops and outlets serving the immigrant communities are likely to have the kind of customer base that these companies target and would be the ideal retailers for the MVNOs’ products.
Collins says: ‘There will be established areas and outlets for distribution to specific communities, but it’s unlikely to be attractive to bigger outlets. They’ll find it difficult to justify the commercials of stocking [Sim cards and top-ups], given the [small] size of the niche. They’ll have to ask if it’s worth it for that square foot of space.’
At launch, there were 200 shops in London and Greater London that stocked GlobalCell's Sims and top-up, but the company is hoping to add more as the product takes off.
Meanwhile, Lebara has been extremely successful in signing deals with retail partners and already has over 90,000 outlets selling top-ups and Sim cards. The company has got some big names on board, including Tesco, Woolworths, Phones 4u and Esso.
Jon Fawcett, marketing director at Lebara Mobile, says that getting the high street brands interested was down to the fact that the company had already proved its business model.
‘The fact that we were established in other countries helped us with the credibility when we launched in the UK. When we were talking to Phones 4u, PayPoint [and other partners], we didn’t say we have this idea and we’ll see how it works. We said we have this, which is already working,’ he says.
It seems unlikely that all the companies going after the same niche will succeed given the limited size of the market. In fact, the newer entrants are looking to differentiate themselves beyond just offering cheap international calls.
Customer services offered in several languages is becoming a must in the sector. Lebara’s call centres speak 10 languages and GlobalCell offers customer services in five Eastern European languages, with more to follow.
GlobalCell has decided to take its proposition beyond what is already in the market. The reason for this is because MD Rochus Schreiber knows that it will never be able to offer the cheapest international calls. He says: ‘You have internet calls such as Skype, which are free. Everybody has a low-cost offer and so do we, but we are different because we also focus on value-added services. We are more targeted at the experience and information that our customers need.’
Beyond telephony, GlobalCell offers its customers other services that are useful to new entrants to the country. He adds: ‘You can ask [our customer service] anything, even if it is how can I order a cold beer in English or how do I top-up? It’s like a free concierge service.’
The company is also adding new services like a flat finder and job finder function to its mobile offering. Currently all services are delivered over voice and SMS, but data services will be added soon, Schreiber reveals.
The operator perspective
Although there is overlap in the part of the population that operators and these MVNOs go after, MVNOs are often better at reaching certain parts of the population than networks are. When striking MVNO deals, operators feel that these will give them better revenue opportunities than going after the segment themselves.
Marc Overton, Orange’s vice president of new business, wholesale and strategy, says: ‘We believe that MVNOs can complement Orange by extending our reach to broader segments of the market.
‘MVNOs targeted at ethnic or niche communities tend to have greater access to these communities in terms of their knowledge of the segment, buying behaviours and distribution channels. This enables us to focus on our wider marketing strategy, which covers a broader, mass-market audience.’
These companies are also able to give more tailored services to customers than operators with a hugely varied customer base could.
Overton adds: ‘MVNOs can therefore focus on developing niche services such as customer services in native languages and specific international calling packages, while the operator focuses on its network and other business priorities.’
From the consumer point of view, the increasing competition in the market for international calling is positive as it brings more choice and lower prices. But the increasing competition will determine which of the ethnic MVNOs' business model has longevity.
The rise and fall of MVNOs
Virtual operators have been joining the market in increasing numbers recently. A similar situation took place a few years ago and, despite a few success stories like Tesco Mobile, a significant number failed, such as easyMobile and Disney Mobile.
Now it seems the cycle has started again and more and more MVNOs are being launched.
‘MVNOs come in fashion and go out. There will be more MVNOs in the next few years, but after that there will probably be some consolidation. A few will thrive but some will go out of business,’ Collins says.
What determines the success of the MVNOs is their distribution reach and, most importantly, the credibility of their brand, adds Collins.
In the immigrant niche, it remains to be seen which of these MVNOs have a sustainable