MVNOs ‘central’ to UK mobile market’s future, says Strand Consult

MVNOs ‘central’ to UK mobile market’s future, says Strand Consult


MVNOs will have a central role in the future of the UK mobile market, according to Strand Consult director, John Strand.

Strand said the approval of the Orange and T-Mobile merger is seeing the UK mobile market ‘facing a paradigm shift’, ‘ where MVNOs will play a ‘central role in the battle to attract and retain the most number of customers, in the most cost efficient manner’.

He said: ‘Up to now, the English mobile market has been divided between the four main operators (Orange, T Mobile, Vodafone and O2) and with a smaller share of the market going to 3.’

He said that ‘in reality, the market has had for players that have battled over having the dominating market share - but without success’.

‘Almost everything has been tried including acquiring shops, launching more shops, launching mobile phone models that one operator has had exclusive rights to market and sell,’ Strand said: ‘However none of the above strategies has resulted in any one of the four operators having a dominating share of the market.’

He pointed out that both Orange and T Mobile have admitted that on a market ‘with decreasing prices and increasing costs of building and running future mobile networks’, they need to have a market share of more than 25% to create a business large enough to give shareholders a sensible future return on their investments.

Strand said the merger proves that the price development on mobile broadband, combined with the general price development will be one of the driving forces behind ‘the market consolidation we expect will sweep across Europe during the coming years’.

Future mobile operators need to focus on two things, said Strand: ‘Reducing acquisition costs and being able to build and run a factory large enough to ensure that they will have the most cost efficient factory for manufacturing voice, SMS and data.

He added: ‘Operators that believe that they can charge more for their services based on a premium brand are naive and are playing a dangerous game with their shareholders money. Telephony is becoming increasingly commoditised.’

According to Strand Consult, the most successful European operators today are those with the most aggressive MVNO strategy.

Strand said: ‘In the UK there is no doubt that the changes on the market after the merger between Orange and T Mobile, will result in all the other operators needing to examine how they can use MVNOs as an active part of their distribution strategy and as an efficient tool to reduce their SAC. The big question is how each individual operator will implement their MVNO strategy and the significance this will have on the UK market in the short, medium and long term.

In practice, Strand explained, we ‘often see operators use one of two strategies; a segmentation strategy where they only sign deals with MVNOs doing business in market areas where the operator is not strongly represented (MVNOs as a supplement)’, or a strategy ‘where the operator welcomes everyone on their network and combines their MVNO strategy with a number of MVNEs, as an efficient tool to quickly launch even more MVNOs’.

Strand said: ‘We believe that the UK will experience an explosion in the number and types of MVNOs on the market and we believe that the market will come under pressure from a combination of the existing large MVNOs (Virgin, Tesco, Lyca, Labara) and a number of new market players - a scenario we have already experienced in Denmark, Norway, Germany, Belgium and Holland.

He added: ‘Simply put, the UK is the next battlefield and the merger between Orange and T Mobile is the fuse that will ignite competition and fuel the role of MVNOs in the future.’

The analyst’s new mobile report, ‘How to Succeed in the Second-Generation MVNO Market’ is available now.

Written by Mobile Today
Mobile Today


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