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. 

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It’s an unstoppable multi-billion-dollar industry and you’ve followed the developments of new licenses around the world. Your analysis shows you that you could make a name for yourself in a burgeoning market.

You’ve got the intel, and the spirit and drive to be successful, but how do you get your idea off the ground quickly?

Ordinarily you’d expect me to say that you should develop a proposition, one that will give a substantial cohort of consumers something different, and compelling, even unexpected. Do the business case and speak to the operators and become an MVNO. It’s a tested model – Deliver a killer go to market strategy and through all means possible drive awareness of your brand and ultimately achieve cut through and customer consideration.

That’s a considerable commitment in time, and cash, even before you’ve started trading. Is it really possible to follow your dream?

Yes, and it can be easier and less costly if you re-evaluate what a brand is. If you set aside the concept of creating a brand, and all the complexities that comes with, but instead focus on the other core elements of running a business then you have a chance.

But a brand is the business I hear you cry. And yes, it is. But you can be a brand without creating your own. Today more and more fledging mobile entrepreneurs are latching on to the merit of licencing a brand.

I bet it’s not something you’ve considered before. It’s an option that has been quietly ticking along in the wings for some time now but came into the spotlight at MVNO World Congress in June, thanks to David Clyde, Brand Director at Lebara.

Lebara is a fascinating MVNO story. It’s now a well-known global MVNO brand, and it stands out because it’s a mobile provider that has proven how it’s possible to adapt a core brand for different markets.

Wherever you travel, the Lebara brand will be recognisable. It’s distinctive logo and uncomplicated offer shine through. Its rapid growth around the world is testament to decisively sticking to its core proposition and knowing its audience.

However, Lebara recognised some time ago that there isn’t a ‘one size fits all’. Brands don’t survive unless they make adjustments for local market conditions, language, and culture.

It’s something that Vodafone have led the way on. The brand team there, understood that a globally recognised and highly valued brand which is usually unwavering in its brand guidelines, needs to flex to accommodate local market nuances without losing the brand essence.

More critically, Vodafone has been highly successful at monetising the brand and what it stood for, by establishing a ‘partner market’ network. With this model, Vodafone allows partner markets to leverage the brand, the propositions, and the insights without technically being an operating company owned by the Vodafone Group. It’s a winning formula – partner without the cost of a network roll out and establish a brand presence in new territories with ‘relative’ ease.

In terms of how you and I experience it, it’s really quite straightforward. When you travel to a Vodafone partner market you may see familiar proposition elements including retail formats that are identical. The brand you trust in the UK is instantly recognisable, and all it stands for comes to mind just being seeing the shop front.

In this case, Vodafone is taking all the best practice, insight and trading experience across retail, proposition, brand, CVM, roaming and so on, and giving partners a way to leverage it all so they can accelerate their own commercial success and what’s more, do it with a standout brand.

It’s with this context in mind, that Lebara’s brand licensing proposition for MVNOs is so interesting. As a budding MVNO you can access a globally recognised brand and customer proposition, with the help of a team who have driven growth for Lebara globally, vastly increasing your chances of success in your chosen market, and probably adding significant credibility for those all so important MNO wholesale discussions.

Is now the time to strike?

Quite possibly.

Lebara has moved quietly and confidently with its strategy, establishing partners in Australia, Switzerland, KSA and Spain. More recently, it announced a partnership in Nigeria with Vas 2 Net, one of the Tier 5 license holders. Vas 2 Net will benefit from an established brand, exec expertise across every discipline and function, and benefit from know-how built from years of hands-on experience. This level of help is undoubtedly invaluable for any new MVNO.

It makes good sense for a start-up MVNO to go this way. As I’ve said, building a brand can be an expensive business both in terms of time and hard financial cost. I know from experience of launching MVNOs in a number of markets. In all cases, we had a trusted brand (Sainsbury’s for instance) and we were simply leveraging the brand values and customer loyalty to move into the mobile space.

For an MVNO starting out with a blank piece of paper and absolutely zero brand awareness or customer consideration, it can’t be overstated how much of a big task it is to make a name for yourself. It takes hefty marketing budgets to gain cut through.

So, why not look at leasing? It’s not just any brand that Lebara is delivering. It’s a well-established and trusted MVNO brand with impeccable smart value credentials, exactly the type of brand that any start up MVNO would aspire to be.

On top of all of that there is the unparalleled knowledge, insight, and experience that MVNOs can tap into, all of which has enormous value.

Of course, it would be naive to think Lebara will work with anyone. Afterall, it has a brand to protect too. Expect it to be highly selective about who it will partner with and steadfast to ensuring every licensee delivers against brand expectations and promises.

Brand licensing won’t be for everyone, in fact start-ups may look at Lebara, Vodafone (and others) and think that they could monetise their efforts with their own licensing strategy. It definitely gives weight to the argument to invest in building brand equity as part of an investment in the future.

With that strategy comes other options too. For instance, you could sell the brand to the MNO to create a sub brand that’s promoted in markets they believe they can grow share in.

My point is, MVNOs have more options for growth than they perhaps realised before. Just as they have a range of choices about their technical strategy and their commercial strategy, they now have some interesting choices on brand and marketing strategy too.

The reception David received at the conference, highlighted the appetite for this diversification. And the questions I was asked subsequently, show how much head scratching is already going on. I’m sure this won’t be a strategy confined to a few markets for very long. Not only should we expect to see more Lebara brand licensees in the future, but I’m certain other big MVNO and/or MNO brands will follow suit in the coming years.

If your head is fizzing with ideas after reading this, then our expert team at Graystone Strategy can help you work through the best approach for you. With over 100 years collective telecoms and MVNO experience spanning technology, operations, commercial and marketing we can help you make the right choices for your MVNO.

The post Is the MVNO future all about brand licensing? Lebara certainly thinks so. appeared first on Graystone Strategy.

However, there’s another interesting story MVNOs should follow. For the first time in its history, the archipelago of Channel Islands is close to launching its first MVNO in the shape of Coop Mobile. Again, all subject to regulatory approval, the launch would be a remedial action in the wake of the likely completion of Sure’s purchase of Airtel-Vodafone.

Why should we care?

It’s all about the development of an MVNO market and the innovation that could come from it.

 It’s worth a few facts at this point. The islands of Jersey and Guernsey are home to 170,000 residents spread across an area of 70 square miles. Each island is independently governed and has its own regulator for telecoms.

Unsurprisingly, the proposed merger of Sure and Airtel-Vodafone has attracted regulatory attention. Principally, the merger would leave the islands with just two operators, limiting consumer choice. If you’ve watched other mergers around the world play out (think Ireland and Austria) then you’ll know that’s a bug bear for regulators. Stands to reason, a merger will be scrutinised, and why there will be reviews on competition and choice. We know from other examples that this leads to interesting proposals. That’s why Sure has put forward the launch of an MVNO as part of its remedial plan. Maintaining a buoyant competitive market isn’t about sticking with the status quo. Innovation – in the form of new licences – can steady the helm. 

Let’s look at the context.

The reasons for the purchase of Airtel are not dissimilar to those proposed by Three / Vodafone in the UK. Airtel-Vodafone is unable to sustain operating costs especially those associated to updating the mobile networks across the two islands. Its decision to exit the island will bring home the reality that it was making a loss. (I can’t imagine it was an easy brand decision to make with the ‘heart’, but I’m certain the ‘head for numbers’ had the final say.)

 Nevertheless, the sale, if approved, leaves a gap in the market. It might be considered a small gap at this stage in the game but closing it with a keen MVNO should turn that assumption around.

Is this really going to happen?

I would say, yes. There’s a good line of retailers that have taken the opportunity to join the MVNO community, setting the precedent for linking a value offer with mobile and combining the wealth of customer insight with targeted propositions.  

Having consulted the Coop team on the negotiations, I’m very excited about the prospect. By applying for an MVNO licence in both islands, Coop can leverage its considerable retail estate as a distribution channel and talk to its 120,000 members using its credentials as a trusted brand. I’m confident it can offer a compelling alternative to the remaining incumbents.

It’s not a done deal, I admit. In Jersey, the Jersey Competition and Regulatory Authority (JCRA) have launched a public consultation process giving consumers a voice on the proposed sale and launch of an MVNO. But it’s a significant step and I would hope it lands favourably. The authorities on Guernsey are also reviewing the proposed remedies from Sure.

As industry experts, we know that MVNOs have proven to be successful at driving competition. Currently in the UK, around a third of all customer acquisitions go to MVNOs or challenger operator sub brands and, historically, retail MVNOs have proven successful. Retailers are trusted, have a cost-effective route to market and the ability to innovate the proposition by aligning it with their core activities.

Tesco Mobile, the UKs biggest MVNO, has been particularly successful in this regard leveraging the Clubcard scheme and its “Super Market Mobile” credentials, similarly Asda Mobile, iD mobile (by Currys) Superdrug Mobile and even Your Coop Mobile offer are all available in the UK.

In Germany, Aldi and Lidl also operate MVNOs and we are seeing retail MVNOs as one of the more successful early entrants to the MVNO market in places like South Africa with brands like PNP (Pick and Pay) and Shop Rite Knect rated as ‘favourite’ brands these days. 

You could say that the outcome of the application for a licence is in the hands of the public. And I think that’s good. In my experience, the public will want choice and will favour the underdog to give them something the other operators can’t. Of course, the regulators need to review other aspects alongside, but I suspect gauging the public opinion will help sway the vote.

As the year unfolds, I think we should expect an historic outcome for the Channel Islands, and I’d recommend MVNOs watch to see how the move is executed. There’s a lot to learn from other markets, especially so in fledging ones.

If you’re thinking about launching an MVNO in a new market or need to drive competition with a differentiated offer, then call me. My team can help you appraise the market, negotiate the deal, and build the winning business model.

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Now I’ve had time to pick over the judgement, alongside the news that the government has said the proposed merger passes the National Security and Investment Act (2021) tests, it’s time to consider what else could stand in the way.

My analysis leads me to think that there are some interesting observations for MVNOs to note, as they might be the next set of hurdles to derail the proposal.

Before I launch into them, it’s worth summarising the areas of concern for the CMA:

1. General reduction of competition and thus likelihood of increased pricing. This is particularly acute in terms of pricing. The regulator sees Three as the ‘price challenger’ so removing it from the market will drive up costs. In turn, the remaining operators will be incentivised to be less aggressive.

1. Wholesale competition. If MVNOs are the answer to the above scenarios, then this is negated by the fact that, in theory, wholesale competition is reduced. With fewer operators providing wholesale terms, and, knowing not all operators will bid for every MVNO out there, there’s less opportunity for MVNOs to provide the ‘competitive tension’ needed to drive down prices.

1. Access to commercial information. This one didn’t get much coverage in the press, but it’s not something to gloss over. The judgement infers that with a foot in both camps of Cornerstone and MBNL, the merged party will be able to see competitor network rollout plans.

At a high level, my expectation is that this will kill off network sharing as we know it today. One way or another, if the merger goes through, (or even to allow the merger to go through), BT and VMO2 will need to reconsider their options with regards to Network sharing.

There are a lot of options. One could be a new sharing agreement between BT and VMO2, with the merged entity managing on its own sites across its current footprint from previous agreements. It’s quite a complex challenge and potentially a big barrier that MNOs opposed to the merger might highlight as a significant risk to competition.

So, with all this in mind, will the merger bring imbalance to the MVNO market?

Let’s start with some facts. MVNOs are normally a driver of market competition. The UK has a very mature MVNO market, with roughly 15-20% of all subs (depending on how you do the segmentation). The UK launched the very first ever MVNO way back in the last century, so the wealth of heritage is strong.

Although MVNOs are still offering great value, the concern is that with just three host operators in the market, MVNO competition will diminish in the longer term. I think the crux of the regulator’s argument is that MVNOs may not benefit from the same levels of aggressive wholesale pricing as they do today.

What’s more, existing MVNOs may not have the competitive tension to drive either a move to another host or re-negotiate better deal terms when it’s time to re-sign wholesale contracts.

I think it is a legitimate concern. Although Vodafone has been a bit less consistent than Three in its execution of a wholesale strategy, both are active.

But there’s a flip side to the challenge.

The new entity will have a lot of network capacity to monetise. Certainly, they will want to compete hard, both at wholesale and retail, against BT/EE and VMO2. But the ultimate question is whether the three MNOs can continue to compete to grow share, or will they try to drive extra value by competing less and forcing the market up?

If they did decide on the latter strategy, then it could take some time to execute. Wholesale contracts (or at least those I have written or advised upon), tend to have clauses that reward growth with discounts and have specific protections against price rises. It’s going to be difficult to walk these back any time soon.

So, it’s not a case of whether this will happen or not, it’s more about what the CMA can do to legislate against that risk.

Around the world, MVNOs have been used to drive competition with varying degrees of success. In some markets, regulators have mandated that MNOs must offer wholesale deals. They have even defined the methodology, which is typically benchmarked against retail pricing using retail minus methodologies.

This ensures MVNOs can be competitive and make reasonable margins. However, consumer competition isn’t always commonplace simply because of the regulated approach to wholesale.

If we look at Georgia, a market which is only just starting its MVNO journey, the networks are mandated to put out reference offers, and, in some cases, there are regulatory requirements to do so linked to 5G spectrum.

But, in my opinion, it feels like the market operators are only really paying lip service to this. They have no real intention or motivation to bring in more competitors, and frankly mobile telecoms competition is the least of Georgia’s problems! So, unless the CMA and OFCOM ensure any legislation has real “teeth” the approach may not be effective here.

In other European markets like Austria and Ireland where there was a similar scenario of operators merging, the regulator mandated more MVNOs to create balance. They also mandated the technical set up (to give maximum growth potential) and stipulated capacity-based wholesale deals. Having launched MVNOs in Ireland that were born from this legislation, I can see the value of this.

Further afield in Mexico, a far more radical solution transpired – a network ONLY for MVNOs.

Where does this leave the UK? What are the CMA’s choices?

It could set wholesale pricing caps across the market to keep MVNO costs lower and to ensure MVNOs can compete on price. Or it could insist upon the JV launching extra MVNOs and the wholesale pricing methodology it uses.

But we shouldn’t forget the UK market isn’t full of MVNOs that are exclusively driven by providing the lowest price. There are others that differentiate on offering other forms of value to consumers e.g. calls abroad and family bundling, better service, different member benefits and so on.

And, even with fewer MNOs, consumers will still get a good deal. Our MVNO market is vibrant and diverse enough to ensure it.

For what it’s worth, based on my 30+years’ experience in telecoms, the overwhelming trend has always been that pricing and ARPUs have reduced in real terms and the value included (whether that’s minutes, texts or more recently data) has grown, not to mention your download speeds.

The recent inflation-linked price grab by the major operators has slowed this, but you still get far more minutes, texts, and data for your pound now than you did a few years back.

Let’s not forget that we have already seen several mergers in our history – BT/EE, Virgin Media and O2, Vodafone and Cable and Wireless, and, for the real veterans, Orange and T Mobile – and MVNOs continued to spring up.

You can see why it’s a difficult conundrum for the CMA, and why it’s prudent that it seeks evidence from all parties to reassure it that competition will be maintained both in wholesale and retail.

The next few months will ensure this analysis is done in detail. Every rock will be up turned. Though, I still hold my view, MVNOs can steady the market and, if we look at this factor alone, the merger has merit.

The trick will be to have a strategy regardless of which way it falls. There will be change. MVNOs need to be thinking about what they would want from an opportunity to renegotiate terms, what proposition development they’d want to do, and how they could turn the saga into an opportunity for growth.

If you’re running an MVNO and reading this thinking ‘we need to do this’, then drop me a line and we can set up a consultation and game-plan the options.

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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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eSIM has been a huge talking point at MVNO conferences that I’ve chaired. Usually, the discussion has been related to predictions, and technology developments and adoption. But today’s move by Revolut makes it a leader of a trend we’ll see repeated.

Revolut is one of many brands who have seen the potential of eSIM and how it can be used to disrupt not just telecoms but its sector. Other recent brands targeting the traveller market include Easyjet and Uber. They are logical. Buy a ticket, buy an eSIM.

New MVNOs like Airalo (founded in Singapore but operating globally), Holafly (set up in Spain also operating globally) and Global Yo (headquartered in Mexico and combining entertainment too) are also in on the act.

But to see a bank take a slice of the action holds real power in terms of consumer value, and it is a true development in the market.

What’s happening, and why now?

Ultimately, these brands offer a cheaper and credible alternative to roaming with your existing mobile operator.

The idea of MVNOs providing roaming substitution is not new. The relatively high cost of roaming in 2012 meant that the GSMA singled it out as a key segment in its MVNO analysis.

A lot has changed since then, not least Brexit. When Roam like Home was introduced into Europe, into was to deal with bill shock and, as a result, the demand competitive roaming options all but disappeared.

Back then companies like truphone (now Global One and the company supplying the service to Revolut) invested significant sums, largely because it was a technically complex undertaking.

But now that technical challenge has gone. Firstly, voice and SMS for roaming are less of a ‘thing’, it’s all about the data and with the advent of OTT apps like WhatsApp and Facetime there really is no need to use your existing mobile number while roaming – people can contact you using data.

The second change is that eSIM is becoming far more prevalent.

That makes it much easier to add a data only eSIM (from one of the providers mentioned above) before you leave or when you land, or even while you’re in your Uber from the airport.

It’s simple, very cost effective and you can easily shop around for the best deal depending on which country you’re visiting.

Travel money with benefits

But what I find really interesting, is that Revolut is positioning this a benefit for its customers. And it is. It’s the killer combination of low cost and high value to the customer, making the decision to use Revolut for travel money a ‘no brainer’.

For a long time, I have theorised that industries like banking should put in place a discounted or free MVNO depending on how many banking products a customer has. It’s a useful and sticky benefit, not to mention it gives banks a route directly to the customer and probably helps with KYC and one-time passwords.

We have seen banking MVNOs spring up in Africa, a continent that boasts real leadership in ‘M money’. But not so much in Europe, and those that have launched, have always used it as a distribution-led offer, generally because they have an estate of banks.

However, today’s news shows the trend in eSIM is blowing this wide open for the digital innovators.

No surprises, but I am very excited about what we will see next. I predict a bow wave of partnerships and launches. What’s more, all this talk of eSIMs, almost makes me want to go on holiday!

If you need help bringing eSIM to market, developing your strategy and understanding how telecoms could help you monetise your existing customers, get in contact or send me a WhatsApp to +447799244962.

The post Revolut cements the eSIM trend. We’ll see a bow wave now. appeared first on Graystone Strategy.

For instance, the prospect of market consolidation in the UK mobile market, represents a seismic shift. MVNOs are already using this as a chance to review their strategy and seek out new opportunities and advantages.

Similarly, in markets issuing new licenses, there’s a chance for the application providers delivering billing or customer service platforms to grow their brand and assert their capability by becoming integral to the go-to-market strategy.

Of course, some brands have cause for concern in times of change. Digital start-ups are eating up market share and

leaving legacy providers in their dust. It’s a case of transform or die.

Yet, for all of these companies, it’s hard to communicate their value in a new world. It’s often not a skill-set they boast, and, as we’ve discovered, not something they have done for a long time. And why would it be if their brand has not experienced the urgency of competing in more dynamic economies, or at such high levels?

Prior to working with us, many have tried to identify the message they need to take to market. But it never gels. Usually because the proposed messaging has come from an internal view of the world. It’s clouded by what people believe to be true, and a mix of opinions that are not always consistent.

It can lead to a short sighted approach with little longevity in terms of how it will support the goals set out in the company strategy. And that’s if there is a strategy that reflects the changing dynamics.

It’s generally at this point that leaders have to accept they won’t arrive at messaging that will cut through, because the strategy is no longer fit for purpose. You can’t lead a company into change if the message you want to convey does not align with what you do and how you do it.

Messaging needs to come from insight. You must know your customers and prospects inside out, and ensure the messaging not only reflects what’s happening today but the direction the market is going. How will you serve those needs? What’s the gap? Can you do it alone? Do you need partners? What will you be famous for?

This makes messaging a cultural exercise as much as anything else. Amazon is clear that if you want to be the largest e-commerce platform in the world, you need people who are willing to take risks, fail, learn and thrive.

Are your people up to the job? Are they capable of meeting the demands of the company’s new strategy? Are they measured on objectives that achieve the strategic goal? Are they supported to become visionary? Are their behaviours a reflection of the company values?

As we start to work with leaders, it becomes clear to them that unless they understand the fabric of their company and how it translates to the market, they can’t address the company message.

That’s a brilliant outcome, albeit for some, unexpected. Having the bravery to accept strategy and messaging are intertwined, allows leaders to take great strides towards realising the ambition.

They can get the right team and skills in place. Focus on partnerships that drive the strategy. Adopt processes that underpin the company ethos and values. Build products and services that meet the customers’ needs and deliver marketing that drives the market demand.

We know, because we’ve got the clients to prove it.

If you find yourself leading a company through crossroads of change, then speak to us about how we can help you devise and deliver your plan.

The post When the market shifts, is repositioning your brand the answer? appeared first on Graystone Strategy.

The NCC’s commissioner Prof Umar Danbatta, has been reported as saying the licences, that each run for a period of ten years, are a crucial part of keeping up to date with industry developments and support ambition to roll out 5G, as well as introduce more competition and opportunity to run telcos in the fixed, M2M, B2B and rural sectors. Wholesale is also seen as a means to help balance the revenue loss that incumbents have experienced as more OTT players take a share of the pie.

As you’d expect with an MVNO model, the new MVNOs will use the networks of the existing operators, namely MTN, Globacom, Airtel and 9mobile.

Challenge brings opportunity

The challenges with such a vast country both in terms of land mass and geography, in particular the challenges of supporting mobile in outlying areas, are significant. The scale of the customer numbers also adds a further dimension.

However, it’s my opinion that there are enormous opportunities too. In fact, we advised numerous potential MVNOs in the run up to the process and submitted a report to the commission summarising the scale of the market opportunities, and the conditions that create a buoyant sector.

Every MVNO will be different addressing these varied challenges, offering services to different segments and regions. Vertical markets will also be targets – oil, tourism, and agriculture all present options for specific propositions. These propositions will include the deployment of private networks at large campus-based operations such as ports through to eSIM for tourists, and IoT / M2M solutions for heavy industry and agriculture.

All the licence applicants had a choice about how they wanted to run their MVNO and the technical investment they were prepared to make. The tiered system of licensing reflects this.

Licence tiers:

The licences are divided into five tiers, each one defined by the services and technology set up of the MVNOs. The specific definitions from the regulator are as follows

Tier 1: An MVNO within this tier leverages on its ability to offer services to its customers without owning any switching or intelligent network infrastructure. They do not control any numbering resources. Responsibilities lie with the host Licensee to provide wholesale capacity to the V.O for delivery of its products and services.

Tier 2: An MVNO within this tier assumes more control of the value chain which allows it to significantly differentiate itself from its host. The VO does not have Core Switching and Interconnect capabilities but can set up its own Intelligent network (IN) to provide their own IN services to the customer. It can own more of the customer segment than Tier-1 operators with the capacity of establishing its own Home Subscriber Register or Authentication centre, Equipment Identity Register, and Home Location Register, if it desires to.

Tier 3: Within this tier, an operator relies on its technical and commercial prowess to launch and operate a full core network with switching and interconnect capabilities. The VO relies totally on its host to provide Radio Access capacity at wholesale to deliver its products and services to its customers. The MVNOO can engage in interconnect agreements with other network providers. Revenue generation stems from both outbound and inbound calls which gives it full control over its tariff structure.

Tier 4: The operator within this tier is responsible for aggregating and/or Enabling MVNO services within the market. It relies on a model in which it stands as a middleman between the MNO and multiple MVNOs. The aggregator is responsible for purchasing bulk capacity from a licensed network operator, and reselling it to multiple MVNOs, therefore streamlining the process of negotiating capacity agreements with said network operators. The aggregator is permitted to choose what level of the value chain it desires to aggregate.

Tier 5: Unified Virtual Operator. In the simplest terms, an MVNO within this tier can decide the level of service it desires to offer ranging from Tier – 1 to Tier – 4. This gives the MVNO freedom of choice to deploy its services the way it deems fit if it still has a valid license. They can engage in “Shared Rural Coverage Agreement” within underserved and unserved regions.

𝗧𝗵𝗲 𝗰𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 𝗮𝘄𝗮𝗿𝗱𝗲𝗱 𝗠𝗩𝗡𝗢 𝗹𝗶𝗰𝗲𝗻𝘀𝗲 𝗶𝗻 𝗡𝗶𝗴𝗲𝗿𝗶𝗮

Tier 1

• Topit Virtual solutions Ltd

Tier 2 (Nine Companies)

• Routelink Integrated Systems Ltd
• Hazon Technologies Limited
• Asel Telecom Nigeria Limited
• Briclinks Africa Plc
• Pisi Mobile Services Limited
• Univasa Nigeria Limited
• Imose Technologies Limited
• Infratel Limited
• Telconix Networks Limited

Tier 3 (Seven companies)

• Amics Technologies Limited
• Zegtel Limited
• Telewyz Limited
• Siu Telecommunications Network
• Abrindex Nigeria Limited
• Metropolitan Consortium Nigeria Ltd
• IPNX Nigeria Limited

Tier 4 (Four companies)

• Imbil Telecoms Solutions Nig. Ltd
• Environmental Expressions Limited
• DMK Telecommunication Nig. Ltd
• Holla Tags Limited

Tier 5 (Ten companies)

• Systegra Technologies Limited
• Choffan Communications Limited
• Mab Consultant and Associates Ltd
• H & Y Business Global Limited
• Taima Technologies Ltd
• Global Communication Extension Services Ltd
• USK (S) Ventures International Ltd
• Paribas Communication Limited
• Fourth Industrial Skills Consult Limited
• Mobilise Communication Ltd

It’s very interesting to see that the majority of licensees have opted for the flexibility of the Tier 5 licence, or the opportunity afforded by a Tier 4 MVNA licence. With only four host networks and over 30 MVNOs to enable, it’s likely that those with an MVNA licence will be in strong position to enable on behalf of network operators keen to outsource the complexity of running multiple MVNO relationships.

It’s an extremely exciting time for this market, and there will be opportunities not just for the MVNOs, but also for parallel industries, including data insight, billing, marketing, and mobile application providers.

If you are one of the MVNOs licensees that wants to out compete the market from day one, or you’d like to understand how your application business can get in on the act, then get in touch to find out how Graystone Strategy’s MVNO launch expertise can help you achieve success. Our blog on “The five MUST DO actions Nigeria’s new MVNO licensees should take for a successful launch” must do to deliver a successful go to market launch is useful further reading.

The post Nigeria’s newest mobile licensees have a big opportunity to change the telecoms market appeared first on Graystone Strategy.

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.

Every day there seems to be a new story about how inflation, especially food inflation, is forcing people to make unreasonable choices about whether to ‘heat or eat’.

In March, the Consumer Price Index will reveal the extent of the damage petrol and energy prices have done to baskets. I remember looking at last year’s index and seeing that ‘communications’ showed a medium variation in price.

I suspect this year, we’ll see a similar story, though I do wonder if next year’s index might show a more marked increase – a reflection of the fact that operators are going to find the next year few years tough.

The energy bills for running networks will be higher than any industry veteran like me will have ever known. Add in the last two years of supply chain problems and you have just cause to put your prices up.

Cost of living wage increases: Three recently announced a pay rise for its retail employees. It’s the second it’s agreed in 12 months. As a result, Three retail employees in London have seen 16.8% increase since December 2021 and those outside London 23.7%.

This focus on ensuring staff can earn a living wage is commendable. But it needs to be paid for. Unfortunately, as with all the rising costs operators are facing, I can’t see any other option than to increase prices.

Small print comes home to roost. If you like to read the small print, you’ll know that most of the large network operators have inflationary increases in their contracts. Last summer, the FT reported on the practice of putting an ‘innocuous’ 3.9% rise plus inflation into contracts. It amounts to some fairly eyewatering increases for households.

Some people will take this on the chin, given the proportion they spend on telecoms compared to other essentials. But many won’t and simply can’t. Just a few days ago, Leeds City Council revealed that it is working with numerous community organisations to help address the growing numbers of people becoming digitally excluded as people kill the internet to free up cash for food or heating.

This reality is creating some interesting dynamics on pricing in the industry. Some operators see recession as an opportunity based on the understanding that many of the value focused operators experienced customer growth during Covid as people started shopping around. Supermarket mobile brand Tesco is perhaps one of the more well-known operators when it comes to making above the line statements about its commitment to not raising prices. But others have chimed in with competitor giffgaff saying it would freeze prices until the end of 2023..

I think it’s a sound strategy especially at a time when every personal finance editor will be reminding people that the MVNOs and sub brands, in general, offer the same network service and download speeds of their host and parent operators.

Often the only compromises people will have to make will be related to whether they are funding a handset (I predict more hand me downs within families and the refurb market getting a boost), access to additional value-added services (which many might say they can forgo for a short time) or the customer services model (apps and chatbots instead of a call centre).

Knowing where to start has always been a barrier for people. How do you compare like for like? That’s where sites like Uswitch will be invaluable. A quick five-minute search shows just how competitive it is if you only want to spend to £10:

• iD Mobile (on the Three network): unlimited calls, texts and 70GB data for £10 on a 1 month only contract. This also included 5G.
• Three came up with unlimited calls and texts and 30GB data for £9 on a 12 month contract.
• Vodafone offers unlimited calls, texts and 40GB of data for £10 on a 12 month sim only contract
• Talkmobile (on the Vodafone network) offered unlimited calls, texts and 60GB of data for £9.95 on a 1 month sim only contract.

Will everyone understand Talkmobile is on Vodafone and iD is on Three? Probably not. Is this a chance for those MVNOs to be more explicit about their network partner? Possibly. Is it worth tracking deals? Definitely. Not every operator will be using Uswitch or alike so I’d advise everyone to cover all the bases by looking at the operator websites or in store too. And bear in mind what you see today (the list above changed not long after I wrote this) will more than likely be gone tomorrow and replaced with something similar.

But the main point is that consumers need to look at what they really use, and therefore where they can make a saving. I think people will be surprised at how little data they use and hence how much money they could save in difficult times without compromising coverage or getting locked in for long periods.

Once people start looking, I also wonder whether we will see some people decide they don’t need to be paying for broadband and fixed subscriptions. In some areas of the country, 5G offers very acceptable fast speeds at some competitive rates – Who fancies £25/ month for unlimited minutes, texts and fast 5G data?

Many will be tempted by these sorts of deals and could potentially move away from the incumbents for the first time in their life. My guess is that once people start scouting for deals, they will more readily abandon their perceptions on brand. Which leaves me to believe it won’t be long before we see some big winners in the MNVO market. The next few months will really test loyalty and the operators putting up their prices need to be ready for the battle.

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