Launching a retail MVNO is, of course, not a new idea. We’ve seen this happen all over the world. But I think it’s the scale that is breathtaking. It’s a huge statement of strategic intent from both sides, and a reminder that retail MVNOs remain one of the most powerful, and, in my opinion, underutilised, growth levers. 

Lidl’s ambition to leverage its retail footprint in multiple countries, combines ingredients successful retail MVNOs boast, including the option to distribute at scale and capitalise on high levels of consumer trust. 

Coupled with access to 1Global’s digital expertise, Lidl is on the road to creating a compelling mobile proposition that can be set directly into the retail experience.

The case for retail MVNOs

Looking back over the last five years, MVNO performance has rocketed and, in some countries, MVNOs post better growth than their operator hosts.  

Close to home, retail MVNOs account for over 40% of all MVNO subscribers in the UK. Tesco Mobile alone has over 5 million subscribers and has successfully expanded into Ireland, the Czech Republic, and Slovakia. 

Alongside it, brands like Asda Mobile, iD Mobile (from Currys), Coop Mobile, and Superdrug Mobile are showing that a close bond between the mobile and retail experience pays off. 

You don’t even have to be trading with shops either, as proved by AO’s announcement last June, that it too will launch an MVNO very soon. 

Internationally, the success stories are just as compelling. The standout example is the market disruptor Bait, Walmart’s MVNO in Mexico. It’s seen extraordinary growth and now holds the number two spot in market share, outperforming two established network operators. 

On the other side of the world, Aeon in Japan, and Woolworths in Australia, are great examples of retail MVNOs that work because they already had so many of the ingredients critical for a successful retail MVNO. 

So why do retail MVNOs work?

Having worked across multiple retail MVNOs, including iD in Ireland, Coop Mobile in the UK and Channel Islands, Asda Mobile, Superdrug Mobile, and even the now-retired Mobile by Sainsbury’s, I’ve seen firsthand what separates the successes from the also-rans.

It comes down to a few critical factors.

1. Unmatched customer access

The first, and arguably most important advantage is customer access.

Retailers like Asda and Tesco have tens of millions of customers passing through their stores every week. That level of engagement dwarfs what traditional mobile operators can achieve. Mobile is a low-frequency interaction; grocery retail is often weekly, if not more.

Retailers also typically enjoy significantly higher Net Promoter Scores (NPS) than telecom operators. In simple terms, customers like supermarkets more and are willing to switch to them for their mobile.

2. Low customer acquisition costs and high lifetime value

Retailers with stores are perfectly placed to convert footfall into SIM sales at a fraction of the cost incurred by traditional operators. They have the space in store to allocate to sales either as concessions, or SIM displays at checkouts, and the staffing is taken care of. Plus, with a steady stream of customers through the door, there’s no need for expensive above the line marketing campaigns to drive awareness and footfall.

This dramatically lowers customer acquisition cost (CAC) and gives retailers the flexibility to invest more in customer offers such as bigger data bundles, better loyalty rewards, and / or compete aggressively on price. 

Retail MVNOs perform exceptionally well on key metrics like margin per square foot. I’ve seen how a small footprint in-store can generate disproportionately high lifetime value (CLV), especially when compared to the relatively thin margins on everyday grocery items.

3. Integration with loyalty

The real magic, however, lies in integration. The most successful retail MVNOs don’t treat mobile as a standalone product. They embed it into the broader shopping experience. This is where many weaker propositions fall.

When mobile is linked to loyalty schemes, member pricing, or exclusive discounts, it becomes far more compelling. Customers aren’t just buying a SIM, they’re unlocking additional value with a retailer they already engage with and trust.

And the benefits are felt both ways. Mobile drives retail, and retail drives mobile. As not only does the MVNO generate incremental, recurring monthly revenue, but it also drives the core retail business. 

Some of the best retail MVNOs I’ve seen, incentivise customers to increase their visits to store, and how much they spend using loyalty point accelerators, discounts, and vouchers. This results in significantly higher retail basket spend and improved customer loyalty.

4. Customer perception is king

Trail blazers like Tesco and Aldi Talk legitimised retail MVNOs 20+ years ago and won over generations of consumers who only grew up with the option of a big operator. The latest generation of mobile users have never known a market without MVNOs. The net result is that brand loyalty to MNOs has waned, and there’s a readiness to switch to brands that are not traditionally associated with telecoms. 

Lidl and 1GLOBAL make for a winning combination 

Lidl knows it can achieve the same results. It brings enormous scale, a strong value-led brand, and a growing digital and loyalty capability, and when blended with 1GLOBAL’s technical infrastructure and international reach, they’ll be able to execute across multiple markets. 

And, dare I say, with brands like Revolut in the 1GLOBAL stable who knows where Lidl could branch out to. Banking and financial services is also a fast growth MVNO segment. I wouldn’t be surprised if there’s a longer-term strategy there. 

Whatever the future holds, for now they have the ingredients for a highly competitive retail MVNO proposition, and it should prompt other retailers, especially in the UK, to stop and think. 

There are plenty of brands with the scale, loyal customer base and infrastructure to make a retail MVNO work. Morrisons More, Boots and its Advantage card, and the various Co-operative groups, spring to mind as contenders. Even Sainsbury’s, despite the previous exit of Mobile by Sainsbury’s, could revisit the opportunity, particularly given the strength of the Nectar scheme today. 

Given the grocery market is so competitive and the challenger brands are not only taking share and winning the price wars but now sharpening their focus on growth through MVNOs, it would seem fool hardy for other retailers to be complacent.  

In my view, this will spark the next wave of retail MVNOs. Because when one retailer moves, others follow. 

20 years ago, retail MVNOs felt like a risk. Why would a brand take money from the business to invest in an unproven model, when you could build another store, refurbish one to add new product line or even buy a competitor?

But now the numbers stack up. The model is proven, with global success stories and strong underlying economics. We talk about their merit every year at MVNOs World because they work. Not only that, MVNOs work hard for their parent brands. 

For retailers sitting on the sidelines, the question isn’t whether this model works. It’s whether they can afford not to be part of the next generation of retail MVNOs. Those that dally, genuinely risk losing out to competitors on both customer numbers and incremental revenue.

So, if you want to be part of the new era but need help with the proposition, the business case, technology choices, or wholesale contract, then Graystone Strategy can help. Our team have negotiated and launched many successful retail MVNO and are perfectly placed to get your strategy off the ground. To get in touch click here.

You can also book a face-to-face meeting with us at MVNOs World, June 1-3^rd in Amsterdam here.

The post Could the Lidl 1GLOBAL MVNO announcement signal a new wave of retail MVNO growth in Europe?  appeared first on Graystone Strategy.

Yet, for employees there will be uncertainty. Having worked in both companies over the years, it’s fair to say that bringing together two diverse cultures will be a significant task for the leadership team. For the merger to work, people will need to be at the heart of the discussion. 

Reducing duplication

That will bring about a debate on skills needed today and how it must bend as the new company goes through various transitions. What does the HR strategy look like for a new company of this size and nature, and what resource is needed to suit the future strategic direction? 

We’ll learn more about this as the broader strategy unfolds, but there can be no doubt that successful delivery will be underpinned by the mammoth network integration and rationalisation. After all, this was the prevailing case for a merger; if the UK wants to lead on connectivity then this must happen. 

Technical integrations of this scale take years. However, everything that hangs off the network must also be consolidated. There will be no luxury in having two of everything – two CRMs, two brand agencies, two BSS. The list is endless. Expect a scrap between the suppliers vying for strategic partner status. 

In the short-term, employees will welcome the job security that will come from managing the process of reducing everything by half. But – and it pains me every time I write this – jobs will go as the process kicks in. 

Three will fade

Getting back to the real basics of a brand, Vodafone’s  has much more equity than Three’s and ratings by the likes of Which? show how far behind Three is. It’s always been my hunch and it remains so now that I’ve seen the new logo, that the Three brand will eventually be dropped and making it easy to revert to a singular brand identity. I’m not a brand expert but I can’t see how a 51% stake in favour of Vodafone plays out any other way. VodafoneThree will be intent on making every ‘synergy’ it can for the ‘new normal’ and that includes the brand. (Buzzword bingo at its best.)  

Wholesale reviews

At a wholesale level, the remedies are now in full swing, so there will be some frenetic energy in the market. I suspect the wholesale team will be inundated with requests as every MVNO takes a look at what there is to gain. And, depending on the scale of the commercial requests, commercial aggregators like Gamma, eSIM Go and Gigs will be asked to step in. Good news for that side of the market. 

But what of the customer? 

Isn’t this all about them? Customers won’t care about any of the above so long as they get good value and service. 

They might start to care more about the impact of the merger when store closures are announced as the retail estate is thinned, or the inevitable network outages happen as a consequence of the integration projects. There’s just no way of avoiding interruptions to service that the aspects of bringing together large organisations will cause. 

There could be a bit of immediate friction too. Higher value Vodafone customers might balk when they realise former Three customers get ‘all you can eat unlimited deals’ for a fraction of the price. It will be interesting to observe how they handle this. 

What’s the right course of action for MVNOs?

1. Request reference commercials – This requires a written request, signing an NDA and, if you are a new company, a convincing pitch to VodafoneThree that you will deliver scale.
2. Review propositions – Can you do something new to target customers who question the validity of staying a VodafoneThree customer? Should your plan be to anticipate outages and seize on the chance to swoop in? 
3. Review your three year strategy – I would expect VodafoneThree to have very specific remedy and post remedy strategies so be warned. Discuss your options now, not when there’s a surprise change. 
4. Use your clout – If you are an MVNO on either Vodafone or Three building and protecting a base you have commercial clout post remedies. Turn this to your advantage and do the analysis to determine if your current wholesale offer is better than taking the remedy offer.
5. Think about your talent pipeline – There will be some great people, with huge experience and knowledge coming into the jobs market. Think about how you can scale with them onboard. 

If you want help running analysis of your commercial terms and how making adjustments could help you grow your business more quickly, then get in touch. We’re here to help. 

The post MVNOs look out. VodafoneThree has landed. appeared first on Graystone Strategy.

But, in gathering reaction from leaders across the market, I can see that several clauses in Friday’s CMA announcement rattled a few cages.

For instance, if you take this paragraph at face value, you could conclude it’s game over:

“may be expected to result in a substantial lessening of competition (SLC) in two markets in the UK. These are the supply of retail mobile telecommunications services to end customers, including both consumers and business customers (the retail market), and the supply of wholesale mobile telecommunications services (the wholesale market). “

In truth, there is nothing new here – it’s the CMA’s remit to explore this aspect of a merger.

The same is true for this clause – it’s not a new concern.

“The Merger would reduce the number of MNOs from four to three, making it more difficult for independent MVNOs to secure competitive terms, restricting their ability to offer the best deals to retail customers. This is important because many MVNOs price aggressively, often focusing on value segments of the retail market.”

It’s true, MVNOs who are usually challengers and price leaders could experience wholesale price increases and hence be unable to drive competition. But if contracts have been drawn according to what I believe to be best practice, and would always recommend, there will be some price protection and the option to renegotiate periodically. If wholesale prices went up, then of course, over time we should expect retail prices to rise too. But there are ways to remedy both challenges, which I’ll get on to.

“Most consumers also told us that they would not be willing to pay more for better quality. We therefore have significant concerns about the impact of the Merger on the large number of consumers who might have to pay more for improvements in network quality they do not value.”

I’m sure if you were asked if you want to pay a premium for quality, you’d be reticent.

But let’s be pragmatic for a moment. If it was a wholly price-based decision, wouldn’t Three as the cheapest mobile operator have the most customers in the UK market? There is clearly a difference between what consumers say and what they do, and I think the JV will push back on that.

It’s this paragraph that reveals the nitty gritty of the debate and indicates that compromise and negotiation are options. The CMA is willing to consider remedies that the two parties want to put forward.

“We are also consulting on potential solutions to our competition concerns. These include legally binding investment commitments overseen by the sector regulator, Ofcom, and measures to protect both retail customers and customers in the wholesale market. We will retain the option to prohibit the Merger should we conclude that other remedy options will not address our competition concerns effectively. In our notice of possible remedies, published alongside our Provisional Findings, we have set out more detail on options to remedy the provisional SLCs.”

If it were me, MVNOs and wholesale remedies would be top of my list. I think they will feature strongly as the parties explore options. But to understand why, we need to look at what else is on the table.

So, what is on the list, and which have merit? 

1. Divestiture, for which there are two directions 

The first is getting one of the parties to divest an asset. The CMA has pretty much suggested that there isn’t a company that could be carved off and could still trade as a separate entity. If we were talking about O2 back when they had proposed a merger with Three, then the Tesco Mobile JV and gifgaff would have been a reasonable candidate for divestiture but there are not really any options between Three and Vodafone.

However, an extremely radical (and highly unlikely) proposal could be to package up all the various sub brands of Voxi, Talkmobile and SMARTY and sell them to a third party which operates them applying MVNO economics.

It’s not as crazy an idea as it might seem, were it not for the relatively low customer numbers involved (probably less than 3million). It’s that which makes it a) difficult to justify a rebalance in the market and b) hard to find a buyer.

The other divestiture available is spectrum assets. There has been lots of talk about this and it is an obvious target. The CMA seem unconvinced that this will significantly alter the competition in the market. The merging parties have been pre-emptive, and if the merger is granted, have agreed with VMO2 (which need spectrum) that it will bring Three into the existing VF/ VMO2 site share agreement.

2. The next remedy is an investment commitment.The CMA needs to be convinced that the parties will make the investments outlined in their plan. If this goes ahead then I think this is almost a given that the CMA will seek to have some sort of binding commitment for this.
3. Retail customer protections is the next.In effect, the merged entity will be expected to honour current offers and pricing in the market for a negotiated period. This was one of the concessions made in the Channel Islands merger that Graystone was involved with, and with that experience to hand, I suspect this is something that can be easily agreed.
4. It’s therefore highly likely there will be a reliance on wholesale and MVNO remedies, with numerous tried and tested options apparent in other markets.

The first is the solution of divesting some spectrum to an MVNO to allow them to become the new fourth market entrant. We have seen this solution applied in Spain recently after the merger between Orange and Mas Movil. In fact, it was only approved subject to MVNO Digi getting access to both spectrum and national roaming agreements so they could become a credible fourth network over time.

How could this work in the UK? It would have to be a full MVNO and not one owned in a JV. So, it couldn’t be Tesco, the most obvious candidate in terms of scale. This therefore limits the options to Sky (most likely) Lycamobile, Lebara or Gamma.

In theory, there’s nothing to stop a credible and financially sound new entrant being created. But not only would that take a significant investment, we also have to remember that the whole premise of the merger is that Three cannot function and make the network investments required to be profitable with 10m customers.

With that as a backdrop, it would be a very brave organisation that takes on the market from nothing. But who knows, maybe Elon Musk, or someone similarly driven and financially able, fancies an adventure in telecoms. Nothing surprises me at the moment…

5. The next MVNO / wholesale related option is capacity ringfencingto allocate spectrum specifically for MVNOs. In the past, there have been two approaches to this. The first, used in Ireland and Austria amongst others, was to ring fence capacity for MVNOs and implement a capacity-based charging model.

In those examples, it was also coupled with bringing in new market entrants to leverage this model. However, it should be noted that those markets did not have such a vibrant MVNO market as the UK. Whilst this model is interesting, it’s my opinion that it typically requires the MVNOs to be full MVNOs, which is capital intensive. Not only that, but there are relatively few in the UK, making it a less viable solution.

A more radical solution, which was deployed in Mexico, was building a network entirely for MVNOs. Wild as it may seem, the same could be achieved using allocated spectrum and a full MVNO infrastructure either owned by a third party or leveraging the merged entities infrastructure (as they will have two of everything!).

This would be like creating the equivalent of Openreach for mobile. So, not such a wild idea as it’s been done before. But I suspect it’s a bridge too far for Three and Vodafone.

6. That leaves us with regulated pricing.On balance, I think this is the more likely option, and fits with the CMA expectations of Wholesale access terms. This could involve pre-agreed non-discriminatory wholesale terms, including prices, being made available to MVNOs, subject to a reasonable limit (number of MVNOs or network capacity utilisation).

This is relatively tried and tested in markets globally. However, the challenge is always how you set those terms. There have been many methodologies deployed in the past and not all have helped MVNOs succeed.

We should also consider that historically in the UK, wholesale deals and pricing have been 100% confidential and, because of this, published wholesale rates could cause a correction in existing wholesale deals.

What would I do? 

No one remedy is the golden arrow, but there are certainly golden threads that the JV parties, and the CMA could look at together. I think that applying scrutiny to the MVNOs and wholesale market is more likely to benefit MVNOs commercially, and therefore consumers, whether it’s a new entrant, or via existing MVNOs.

That’s where I would focus attention initially and it’s why I still think there’s a good chance of this happening. The CMA is stating a position of openness and it’s now up to the parties to come to the table and negotiate.

If this has made you think your business needs a plan fast to react to what will be a significant market event whether it is a yes or a no, then speak to us at Graystone. This is our heartland and we’d only too pleased to work with you on a strategy for success. 

The post Vodafone / Three JV – is the CMA signalling game over? appeared first on Graystone Strategy.

My bets are a decision will come, and it will be to let it go through to phase 2. It’s a long process, probably running until the Autumn, and will be run by a second independent team, but it’s wholly worthwhile. I see no reason not to do the due diligence.

Phase 2 will get into the nitty gritty. Fundamentally, it will look at the market, the consumer interests and wider national infrastructure issues. Economic prospects will form part of it – jobs are always a thorny issue. I see that as an inevitable part and parcel of the market, and of course this deal, but I don’t think the CMA will say it’s a deal breaker.

Chinese ownership has also been cited as a barrier to merger, and parliament debated this on 14^th December 2023 (you can watch it here). It’s important to note that aspect is out of the hands of the CMA. Its remit is to look at competitive telecoms. The NPSA will have its say, I’m sure and it’s best we await their judgement.

I guess the big question is why now?

If like me, in your early working life you watched Vodafone emerge from above a curry house in Newbury, you’ll find this a fascinating tale of fortunes. How can the trailblazer be in a position to consider merging with the minnow?

Speaking on the record to both parties, the proposed deal is about scale. I have to agree that it is a necessity in the UK. The last few years have given birth to some hefty players. BT/EE and VMO2 are making returns, and Vodafone and Three will feel like they’ve been left in the cold.

For Three, the options are limited since the failed merger with O2. It needs this to work. Vodafone will argue it needs it too. But for different reasons – a merger is a steppingstone to acquisition (let’s not forget the 51.9% share it would have), and the share price needs revival.

A merger would stabilise market dynamics. But most importantly it will give the UK’s 5G infrastructure the capital boost it needs. £11bn is on the table and I’m doubtful consumers will be sold on the 5G dream until they experience it everywhere, every day. They certainly won’t pay any more for it until they realise more of the benefits the government wants for its UK ‘power-house’ credentials.

The real advantages for consumers and businesses will come from continuity of service and connectivity – promises associated to Digital Britain. With combined capital, RAN and spectrum sharing that a merger like this facilitates will give consumers better, faster mobile. That can and will drive market competition and challenges the network leadership of BT/EE. It all adds up to an enticing prospect for the government, which so desperately needs to prove UK ‘power-house’ credentials.

But for the CMA, it’s a case of weighing up whether stabilising the market today would eventually create a market imbalance tomorrow. Currently, VMO2 and BT/EE are benefitting from mobile and fibre bundling. A sticky proposition in a market that needs to retain customers to survive. Of course, these brands achieve it with their own infrastructure.

Sky, on the other hand, is performing extremely well in the market without the network overhead. Many forget this. But not Vodafone. It says Sky’s impressive customer base and market power is a cause for concern.

I’m not sold on this as an argument, but I do agree that Sky has logged some very impressive growth in a relatively short time.

There’s also the buoyant MVNO market, ready to snap at the heels of change. If phase 2 concludes in favour of a merger, then the publicity alone could prompt consumers to rethink their provider and look at the smaller more innovative brands. Add to this the teething problems all brands inevitably go through when they merge and consumers could be persuaded to leave either brand for a better deal, and better service, elsewhere.

That said, there’s also opportunity – I can see the likelihood that a merger would encourage more MVNOs to spring up. Largely, because there will be capacity to fill, and Vodafone will want to put the wounds of losing Virgin behind it and build credibility again. There could be some exciting deals to be done for any MVNO that wants to renegotiate terms or has intentions to start up. That’s another reason for the merger, as it could give rise to more equable MNVO shares across the market.

Overall, I’d say there’s more to rule in favour of the merger than against it. But of course, this is all pie in the sky until phase 2 concludes. And there will be firm warnings to anyone counting their chickens before they hatch. The CMA will follow a strict process and woe betide any party getting ahead of it.

As an outsider looking on, I’m prepared to sit on the fence for now. But if you really pressed me for an outcome, it will be that at the end of phase 2 the CMA waves the merger through.

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So, what next? Time will tell if the CMA approves it, but when you consider the UK is a mature market, that is capable of self-righting itself when it comes to managing competition and price, not least because of the very healthy MVNO landscape, I can’t see a reason not to.

Personally, I would be surprised if it isn’t approved. Ofcom has already signalled some consolidation would be supported and shareholders certainly reacted well to the news when rumours a deal would be announced emerged.

There is concern about dominance. True, it will create a £15bn company. However, in terms of percentage share, it will keep a reasonable balance between the three incumbents – all sit in the 30’s.

In Ireland, new MVNOs were part of the strategy to keep the market competitive when Three and O2 merged. But wholesale is already a big driver for growth in the UK market so that form of intervention shouldn’t be necessary. The emphasis that competing operators put on wholesale won’t stop, in fact it could ramp up because of this deal.

Integration headaches

If they get the green light, the two parties will have the hefty task of integrating the brands. It’s a project that will merge everything from networks and infrastructure, people, and processes. And all of it must be done to deliver on the shareholder expectation of greater ‘synergies’ and cost efficiencies and improved service and propositions for consumers.

There will also be brands to blend. Could they go down the same path as Orange and TMobile and rename entirely, or will they meld the names as Virgin and O2 did? It’s hard to call. In Italy Wind and Three became Wind Tre. And what of the sub-brands? There will be some busy people looking at the portfolios.

At a network level, cell sites will need to be reviewed and a more unified technology approach will be imperative. It’s inevitable this will include some meaty and complex commercial discussions around site sharing, given Three is part of site sharing group MBNL and Vodafone is part of Cornerstone.

I suggest we dial this point up and highlight that the new entity will have 2 budgets to invest in one UK infrastructure, driving coverage and 5G not just for consumers but in B2B and IoT too

The big question to resolve will related to whether the other operators involved in the shares will allow the new entity to access both schemes without compromising competitive advantage.

Protecting continuity of service. The last thing either party will want to lose during the integration phase is customers. But these types of big integrations rarely run smoothly, especially when network footprints are involved. There are different vendors, technologies, strategies and corporate values and approaches to align.

Then there’s the more practical customer end of things. There is no doubt that they will need to rationalise tariffs. Preoccupation with settling that and agreeing how care is delivered will have a knock on to customer service delivery. It could feel quite painful for a time.

Talent up for grabs. While two heads may be better than one, in the case of a merger the opposite is true. Duplicated effort will need to be addressed, so expect lots of talented people looking for new roles. Plenty of parallel industries driving IoT / 5G applications to snap them up – it could be good for the major private network infrastructure projects at ports to support more efficient and buoyant international supply chains.

Opens the door for competitors. Change is a gift for opportunist and well-prepared competitors who can target customers in a period of change and potentially grow their customer share to the detriment of the new entity. Smart operators should already have plans in place to address this and they’ll be looking for people with the know-how to deliver it.

MVNOs could win more than anyone. Savvy MVNOs will be doing two things – looking at the tariff line up and working out where they can steal customers (business and consumer), and they will be circling for the talent.

But it won’t necessarily be plain sailing. I’d be encouraging all MVNOs to engage with their partner, especially those with Vodafone and Three, to understand the potential impact and change this could bring to the market. Anticipating the need to renegotiate terms, identifying retention plans, through to considering the risk / impact / opportunity of outages are all things to have on the to do list.

Opportunity for vendors. It’s also a challenge for vendors selling into the merged entity. There will undoubtedly be a rationalisation of vendors – each operator has several billing systems, different approaches to customer care and preferred suppliers for network equipment. Over time, the preferred supplier list will be streamlined by procurement teams as they leverage increased scale and reduce costs.

But even the winners of this procurement scrap may find they miss out. Simple maths tells you that if they supplied to both operators individually, then the sum of the parts is likely to be smaller than the value they achieved from the separate organisations.

Value for consumers. In the current financial climate, consolidating operators needs to happen. My bet is that it will be a strong argument to the CMA / OFCOM to support the merger. It’s no secret that in a market with stagnant ARPU (barring inflationary rises) and year on year growth of data usage, smaller operators won’t be able to sustain the level of investment required to deliver quality of network service. Plus, I think that the significant savings on the associated costs of 5G will have been used to demonstrate the value the merger will deliver to consumers.

However, it’s possible consumers might not win as much as planned when it comes to tariffs. I’d expect to see some of the richest and best value tariffs (probably on Three) being retired. Consumers, already hit with extraordinary inflationary price rises, will be forced to shop around, especially if the most aggressive all you can eat tariffs are withdrawn. MVNOs and other networks could and should take advantage of the appetite for a better deal.

You can see it’s not a clear-cut win-win for consumers, employees, competitors, and vendors. It’s a big change in the UK telecoms market, that will take time to deliver and as the integration progresses so the market dynamics will alter. All players in the ecosystem (including consultants like me) need to consider the impact on their business and build a plan to exploit the opportunities and mitigate the risks.

The post The Vodafone / Three JV intention is a huge milestone for the UK telco industry. What should we expect in the coming months? appeared first on Graystone Strategy.

So, as you can imagine I found the Mobile News’ headline ‘Three CEO Robert Finnegan: ‘The UK market is dysfunctional’ pretty thought provoking.

Looking back, it’s not the first time Robert has said something like this. Since taking up the helm he has clearly picked up clues that others haven’t and it made me delve under the bonnet.

If we look at this in purely economic terms, the term ‘market’ means the exchange of goods and services that takes place as a result of buyers and sellers being in contact with one another, either directly or through mediating agents or institutions.

This means a dysfunctional market would be devoid of the processes that allows for an exchange of goods.

Clearly that is not the case. We have a wide and disparate market in telecoms with a significant range of sellers, which encourage competition, another attribute of a healthy self-regulating market.

In fact, for the buyers of telecoms and particularly mobile services, the UK is a very competitive market. OFCOM research shows that the UK is the cheapest when compared to four other markets including France, Spain, Italy and Germany, even though they all have declining costs of ownership.

Over recent years, UK mobile owners have enjoyed a 19% reduction in prices and an average of 146% increase in data use. This has been driven by aggressive consumer pricing and all you can eat bundles, funnily enough spearheaded by Three. (Three customers use about seven times the data of a market average consumer.)

So, what’s dysfunctional about it? Is it this discounting that is the problem?

Certainly, in a saturated market such as the UK, increasing use and decreasing value will drive operators to investigate other sources of revenue. Whether that is bundling in extra premium services such as Netflix, Disney or Spotify, or focussing on higher volume incremental growth such as IoT connections.

I wonder then if for Three the challenge that is really presenting itself is that until very recently it has disproportionately focused on the consumer market making it difficult to secure a foothold in the large and more stable enterprise and business markets.

Though it has to be said that this is changing. Three announced its latest SME tariff offering of 10 business subscriptions for just £20. It’s a move that is going to really shake up pricing in the enterprise market and I can only imagine it will be viewed with a certain amount of disapproval by BT, Vodafone and O2.

There’s no arguing it’s a great deal but I suspect analysts will be asking ‘does Three have the extensive products and services required to really tackle the business market?’.

It’s fair to ask. Three has suffered from disappointing results when it comes to coverage, recently coming last or third on all the metrics from the recent Opensignal report. For business buyers coverage is the number one hygiene factor so it’s a perceived weakness that has to be addressed quickly.

Secondly, even the smallest companies are now looking for flexible, fixed mobile converged products and a trusted all round telecoms and IT partner. Three is just not there yet, though there is most definitely potential to look at some of the recent hires.

There’s also a bit more colour to add to the picture. Mr Finnegan hasn’t shied away from talking about consolidation and for Three that can mean only a few things: 1. a merger to gain economies of scale, and Three has some impressive spectrum assets to make it more appealing to a largely complimentary customer base for a buyer like Vodafone , or 2. an acquisition or merger with an organisation that can accelerate Three’s access to fixed and converged assets and give it increased credibility in the business markets through a broader more appealing offer, especially for more cautious business buyers. You can read more about our thoughts on this here.

It has to be noted that this would in all likelihood diminish competition in the market sense. But it would set up Three to be a full suite competitive challenger brand for all the networks.

And why not? We would do well to recall that Three merged with O2 in Ireland and was able to make that leap from fourth player consumer brand to number two in the market with a strong enterprise proposition, albeit in a much smaller market.

But whether you agree that the market is ‘dysfunctional’, you dispute the notion entirely, or you’re happy to sit on the fence and look at all competitive disruption from Three and MVNOs as a positive, there’s no doubt that it all makes for exciting headlines. And frankly it shows that as we leave this disaster of a year behind us it won’t be long before we have more exciting headlines to debate.

If this has made you question your strategy for the year ahead, then I’d be happy to walk you through my approach to summing up change and anticipating market moves so you can set out on the right course in 2021.

The post Is it right for Three to ‘dis’ the UK telecoms market? appeared first on Graystone Strategy.

My biggest observation was that the speed of change curtailed the amount of time retailers had to respond to the competition let alone the situation. In normal times, copy-cat services and introducing new ways of shopping would have been finely tuned, but no one had that luxury. The consequence was that several large retailers went into administration and many well-known brands left the high street. If you couldn’t keep up you really were left behind.

Much of this is related to the store to head office feedback loops that management teams rely on. Retailers need the ‘frontline’ to help assess performance and gauge the success of offers and marketing – word of mouth from store teams and customers is helpful to apply to statistics. But it simply hasn’t been possible or practical and it’s been telling as to which had the best models to adapt, be agile and perform.

Of course, online retailers were quick to swing into action and those that were already operating strongly in this space with established and robust systems in place took centre stage. The smart retailers didn’t let retail closures stop them and switched tack by using the store footprint to act as mini distribution centres or teamed up with brands that could stay open to provide a click and collect service overnight.

That form of innovation is an indicator that just as there were losers, there were also winners. Lockdown played into the hands of grocery, bike and outdoor retailers, home improvement, craft and gardening sectors, and pushed other sectors into innovation such as Michelin star food to go. The other upside was that local shops saw a resurgence with many benefiting from customers not wanting to travel and switching allegiance to the under-dog.

What’s in store for 2021? Five things stand out:

Looking ahead to next year there are some big challenges ahead:

1. Firstly Brexit. Already a huge challenge for those selling products sourced in Europe but even more so as we still don’t have a deal to plan against. Things like imports and tax will be all consuming and it would be naive to say there won’t be teething problems (an understatement…). And if you’re in the tax free shopping market and reliant on tourists you’ve got to assume you’ll have a tough start to the year.

2. Next year will be all about the survival of the fittest. If you’ve made it this far then you’ve been doing something right, but it’s still up hill until things stabilise. When customers are allowed to travel and engage in the high street again then I suspect they will in the droves. It’s a fabric of life that’s been missing for so many people and it’s this that presents an opportunity for retailers to re-engage and remind their customers, new and old, of their values, and how exciting shopping is. It also goes without saying that there will also be incremental revenue opportunities for the retailers who survived as they fill the gap left by the retailers who have closed permanently.

3. Online will continue to dominate things so retailers need to consider the change in consumer behaviour as a more permanent fixture – pandemic or not – and accelerate the delivery of a ‘seamless’ customer experience. Online has been on all of their agendas for some time, now there is no excuse not to make it happen properly.

That said, online won’t take over entirely. Instead, we’ll see a re-balancing so stores will make the majority of sales in the future but online will make up a greater share of revenue than before 2020. This re-balancing will happen as things ease, and in the way retailers respond with pop-up shops and ‘experiential’ strategies.

4. Without doubt successful retailers will really know and understand their visiting customer and will deliver a service that matches and surpasses expectation.

That will most likely influence where their shops are located too – can they capitalise on being close to the bigger destination stores even if it’s in a very small unit? Will people reconsidering car use and where they work make a difference to where stores are? How is footfall likely to change in the future as things re-set? Using technology and insight to understand this context will be vital. (We have developed a tool to help with this)

5. While there will be many people chomping at the bit to go carefree shopping there will also be those more reluctant. Town centres need to think about what they can do to give these people the confidence to return to the high street and keep the community of local shops alive – it might be free parking during quieter times of the day, or better cycle provision. All of these things have been talked about for a long time but now there is a pressing need to make them happen and to compensate for the shift towards online.

 Independent shops will likely come together to tackle this themselves too. Many customers are appreciative of how the local shop responded to this year’s challenges so this works to their advantage. However, they need to continue to provide something unique, great service and engagement so that the momentum keeps going, and make sure online services are in place should they come to rely on them for weeks at a time.

If you need help defining a strategy or want to find out more about our services and tools then please get in touch.

The post Five things retailers should plan for in 2021 appeared first on Graystone Strategy.

It’s evident that retailers are among those closely following this mantra. Criticised in the past for bringing out Christmas goods too early, this year it seems the public is receptive. Christmas trees can already be seen through windows in our neighbourhood and recent research by M&S found that Christmas-related searches had increased on its website by 80%.

We are now well into the ‘Golden Quarter’ for retail when most will deliver the majority of their annual sales and profit. Without a strong Christmas we will see challenging retail outlooks in the new year. It’s therefore justifiable to meet an unusual customer demand for an early Christmas.

The sense of needing something to look forward to in a lockdown, and a hesitation to queue outside a shop in the cold or rain or be in a crowded place when it lifts will drive people online. Consumer confidence figures and redundancy numbers also indicate a large number of people will be budgeting more this year, buying special long-life foods and treats to get ahead, and gifts for friends that can be delivered for them.

This Christmas will be a true test of ‘omni-channel’. However, I believe it will be the retailers that still try and achieve a feel good Christmas experience for their customers that will win more than any other. Shopping is a sombre transactional affair right now and adding magic and sparkle really is so important.

So how do you translate the normal Christmas retail atmosphere into an online setting? Virtual Santas, Zoom gift elves, virtual tours of the shop floor, the use of video and music all have a role.

Of course, it’s important to accept that footfall will be way down on normal levels and for the customers who do brave it after lockdown there should be the reward of receiving a special Christmas experience. From carol singing, mulled wine and chestnuts to stunning lights, it’s the retailers who deliver this that will be on the good list.

In some ways that’s the easy bit. The biggest challenge will undoubtedly be planning stock and resources around the lockdown and into tiered levels again. It’s why I think we’ll see more retailers centralise their stock and use online, and click and collect (or when we can, instore ordering) to manage the risks.

Helping customers get what they want in a timely way will help differentiate the brands that do well and those that struggle. Much of this will be about supply chain planning and technology, staff training and great communication so people know what to expect and receive a consistent and positive experience.

In some ways the rules haven’t changed – deliver the best experience, a great line up of products (not necessarily exhaustive but perhaps original), competitive pricing and easy ordering and delivery models. It will rely on going the extra mile with supply chains that are clockwork and employees who are super engaged in the plan, more options to pay, extra resource to provide help and support, flexible delivery options and longer return periods.

It won’t be easy, but it is possible if you understand your customer, can anticipate their needs and find ways to deliver the extra mile.

Get it right and it can be a case of ‘winner, winner, turkey dinner’.

The post Winner, winner, Turkey dinner! Can retail have a golden quarter? appeared first on Graystone Strategy.

TEAM

It’s been said a million times before, engage your team and they will engage your customers. Now like never before this should be your number one focus over the next 100 days of trading. If you are banking on a Christmas windfall then you must start here.

Store teams are on the frontline in these unprecedented times. They are frightened, overawed and confused. They may feel exposed. And the same is true of customers. So how do you ensure that store teams feel supported, engaged and motivated so that they can deliver an extraordinary experience in these extraordinary times? Four things that must be in place. If it’s not your forte get someone in who can help you. It’s a very worthwhile investment.

• Communication – regular, clear and accurate. Get into a rhythm of sharing updates and helping people feel confident and supported, with opportunities to ask questions and get honest answers.
• Establish easy to use help lines. I’ve seen the power of this. Ones that are manned every hour the stores are open provides a sense of ‘we are all in this together, there for one another’.
• Lead from the front. If you can change work from home to work from store some of the time then do. You’ll need to look at the practicalities, but if your teams are prepared to do it, then so must the management team.
• Motivate, excite, engage. Just because this year is different it doesn’t need to be full of dread. Be creative, make retail fun – there are so many brilliant people out there who can help you achieve this. Get it right and it will be infectious, customers will value it.

IN STORE

Understandably there are wide ranging ‘rules’ that have been introduced across all of retail. Some imposed, like masks and 2 metre distancing, some unique to brands, from whether you can or can’t try on/touch something, and whether it would be quarantined afterwards, to the number of people in a store etc etc.

It can be confusing for customers and turn them away. So help customers to feel comfortable:

• Keep it simple. Strip back and have as few rules as possible so that customers understand what they have to do.
• Make space. Are there non-essential products and fixtures that could be removed, would signage to say they are available on request be a better alternative so your high margin, high turnover items are always available?
• Windows. They are more important than ever in bringing alive what customers will find in store and a brilliant way to inject some theatre into your brand and stand out.
• Innovative services. Where are your pinch points and where do they overlap with the customer’s concerns? For example, can customers book an appointment with a store member in advance of visiting so they get what they need quickly? What other services can you offer – gift wrap and delivery from store after your purchase. Secret Santa or office parties ‘at home’ kits could be a winner now.

DIGITAL

Gifting is what the next 100 days are all about so do everything you can to be front of mind:

• Transforming your entire digital experience may not be possible right now but there are smaller changes you can make that will have a big impact – is the menu and layout easy to navigate? Is it fast to load pages, do images have ‘wow’ impact, how many clicks do I have to make to get from home to checkout via a purchase? Get these right as soon as possible.
• Is the site optimised for mobile? Such a win-win that I still can’t believe how few retailers have it in place.
• Are you always ‘on’? Web, social media, chat… we have to approach digital as we do stores. When customers come ‘in’ they should be engaged and inspired from the first click. This is going to be a huge area of emphasis. People will browse and possibly never make it to store, converting them is essential.
• Are you translating all of the normal seasonal experiences onto digital? Skinning digital platforms so they have seasonal impact is so important. You need to create that digital winter wonderland. But don’t stop there, what about trick or treat? Ultimately think about how you help people enjoy winter events at home this year.
• How do you ensure customers still browse? Can you use pop ups for suggested ‘add ons’? Could you create a gift market on the home page? Could you design a digital version of the Christmas shop where customers are able to virtually walk through the store and make selections?
• Finally, but most importantly, is the operation robust? From selection to warehousing to delivery it’s absolutely essential you build in the capacity now so you can deliver on a memorable customer experience people will recommend.

The next 100 days will be different, but brands have an unbelievable chance to do something completely new, engaging and exciting for customers. If you need help developing your strategy then speak to us. We’ve developed successful, award winning marketing campaigns for retailers around the world.

The post The next 100 days will be the toughest ever for retailers. How can brands stand up to the test? Peter Scott our head of retail consultancy takes a look appeared first on Graystone Strategy.

I follow Asda closely – like a teacher likes to hear how a pupil succeeds in later life, I like to know how the brands I helped launch grow.

I was aware that Asda was reviewing its options and commercials but considering how poorly the move from Vodafone to EE went some years back, I was, to say the least, surprised by this return.

I’ve already been asked what I think is really going on, and I see a few possibilities here.

Asda has always struggled to grow to a size that befits the size of its retail business. Part of this can be attributed to its prepay only offer, but more recently it’s a symptom of a declining market now representing only 28% of all mobile subscribers. When it originally launched in 2007 it was almost double that.

Asda has also struggled to link Asda Mobile intrinsically to the grocery shopping experience. Sainsburys, which I also launched for Vodafone, did it through the Nectar scheme rewarding mobile customers with double points on their groceries. Tesco has done a similar thing and continues to link the categories it owns.

So why go to Vodafone, what materially changes? Well, what I hope to see is some exciting SIMO post pay propositions coming to market. There were hints of ‘digital experience’ in the announcement, and so we might see some innovative ways of linking the value you give in one category to another. It’s this sort of innovation that makes Vodafone attractive.

However, there is one major hurdle – migration. This can be painful at the best of times. Asda customers will have to do a SIM swap and that’s no mean feat on a prepay MVNO where Asda won’t have all the customer details.

It’s also likely to trigger some sizing up by customers. People are highly likely to re-evaluate the service they get and consider the other options. There are some great deals out there right now and Vodafone’s VOXI will be a big competitor.

Coverage is also likely to be a point of consideration. Customers who have coverage on the EE network won’t necessarily get it on the Vodafone network. That’s just the challenge of mobile coverage. This too will cause churn.The upshot is that if they manage to only lose 20% of the base in the migration they will have done EXTREMELY well.

Of course, an announcement like this doesn’t stand alone. There will be ripples. EE/BT, has so far ‘played 3, lost 2 won 1’. It lost its biggest wholesale customer Virgin to Vodafone, (who is then likely to lose it due to the proposed Virgin merger with O2 , then it won a five year extension of Utility Warehouse, but losing Asda will be a blow. Just goes to show you can’t ever rest in this business.

Overall, it drives a lot of work for EE/BT as it will need to put in place a team to support the mass migration of the two MVNOs. It could definitely be a distraction from winning new ones.

Overall, I expect to see yet more movement in MVNO wholesale deals. There are a few more out there to compete for. The prize that may just be up for grabs is Sky, triggered by the O2 and Virgin JV. It’s not beyond the realms of possibility, so I will be staying glued. And it’s probably enough of a reason for anyone else in mobile to stay tuned too.

If this shakes up your plans and you think renegotiation is likely then get in touch. We can help you understand the games being played and the moves you can make.

The post Asda Mobile goes back to where it all started. What can Vodafone deliver for the brand? appeared first on Graystone Strategy.