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