…do MVNOs add or destroy value for incumbent mobile operators?
What has been the impact of MVNOs on the markets in which they operate? It seems a pertinent question to ask in the month in which French operator SFR has announced it will act as host network operator to Debitel. Debitel already has MVNO operations in Germany, Denmark, The Netherlands and Slovenia and now has its eyes set on the French market, in which it already has a firm retail presence. It took a while, and a considerable amount of “shoulder to the regulatory wheel” to convince the two French operators (SFR and FT/ Orange) that the introduction of MVNOs was a) desirable b) at least if not desirable then inevitable. But now one of the last major markets not to have had any such model will benefit from the explosion of third party consumer brand operators. Or will it?
Because when the MVNO model was first proposed the predictions were that the big brands, such as the utilities, major retailers, entertainment providers and other fixed line telecoms carriers would rush to advance the spread of their marketing muscle into the mobile world.
Well, it hasn’t quite happened like that. Virgin Mobile’s contract with T-Mobile (or One2One before its acquisition by the German giant) had to be re-negotiated in somewhat bitter terms – although the host operator was quite happy to quote the nearly four million customers Virgin has added in its own subscriber and pre-pay numbers. But at least Virgin has fulfiled some of the aims of an MVNO – that it would open up parts of the market previously unattainable or unprofitable to the host operator. In the USA, for example, this meant Virgin virtually pioneering the concept of pre-pay, something which even hot operator Sprint doubted it could have made pay. In he UK Virgin Mobile has been joined by Tesco Mobile, which has O2 as its host carrier, and more recently BT has brokered its way back into the consumer mobile market via a tie-up with Vodafone. These are the kinds of deals we were supposed to see under the MVNO model – massive brands leveraging their customer base and marketing know-how (well, perhaps not the latter in BT’s case!) to bring in new services and concepts to a fairly saturated market.
But the inevitable downside, especially in Denmark and Sweden, has been massive price erosion, as the new, overhead light, players, aggressively target the profitable sections of the market. This diminishes returns all-round, and in certain cases text messaging is virtually free. Cuckoos in the nest indeed, some incumbent operators feel.
In France, there seems little chance Debitel will alter from its policy elsewhere in Europe, and expect there to be an announcement soon from FT regarding a partnership with an MVNO of its own. The shape of the market is changing, and it will be those host operators with the highest margins to eat into, or who can flex enough muscle to get favourable terms from their partners, that willl benefit most. And we all know who they are.
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