THOUGHT PIECE: The impact of MVNOs on traditional network operators

Did you know that there are over 50 mobile networks in the UK? Probably not, unless you work for a telecoms company (and maybe not even then!). The newest entry into the market is Vodafone’s VOXI which targets under 25 year olds; and it caused some discussion here at Marketing Sciences about how much this market has changed in the last few years.

First, let’s take a step back and take a brief look at the market. It won’t be a surprise to most of you that there are four main network operators in the UK: O2, Vodafone, EE (previously Orange and T-Mobile) and Three. These four brands share the majority of the UK’s network coverage, as well as the majority of the market share.

However chipping away at this market share are the newer mobile network brands such as giffgaff, BT Mobile, Sky Mobile and the more established Tesco Mobile and Virgin Mobile. As you probably know (but the majority of consumers do not, from our research) these networks do not own their own airwaves, but lease coverage from the big four; and therefore they are known as Mobile Virtual Network Operators (aka MVNOs). For example, giffgaff, Sky and Tesco Mobile coverage is provided by the O2 network, while BT Mobile and Virgin Mobile uses EE.

Over the past year or so, we’ve seen new MVNOs join the ever-more competitive market; and most are supported by major companies or the big four operators themselves: like VOXI, built by Vodafone; and SMARTY, owned by Three. Another threat to traditional networks are companies offering ‘quad play’ (i.e. broadband, landline, digital television and mobile services) like Virgin Media, Sky, BT and Plusnet.

But are MVNOs good news for consumers? In my opinion, the short answer is yes.


New MVNOs generally have lower overheads (they don’t need to maintain their networks) and some are able to offer extremely tempting discounts to get users to switch to them, allowing them to establish their use base by ‘buying’ market share (as Sky and Virgin are doing); forcing traditional networks to also be more competitive on price.

MVNOs are generally built to target or accommodate certain unmet customer needs: such as flexible contracts or data usage. Most offer shorter contracts than the standard 2-year fixed handset contract: and now we don’t change our smartphone handsets as regularly, there is no need to stick to the (often more expensive) rate we signed up to with the phone. Indeed, giffgaff use this flexibility as a selling point through their tagline of: “No contract means you’re free to go, free to stay. That’s why we work our socks off to keep you.” Given the exceptional growth they’ve had, it’s clear they are successfully tapping into this desire for flexibility.

Flexibility on data usage is another changing customer need that MVNOs are targeting: Sky allows you to roll over unused data allowances while SMARTY pays you back for any unused data, and VOXI offers free data use on social media (i.e. it’s not counted in your data usage) – critical to your millennials who need everyone to share in their commuting woes via Snapchat, or post edgy Boomerangs via Insta [large drop of sarcasm needed here please!].

Stereotypes aside, data is king in our modern ‘always on’ society, and is becoming increasingly important: the number of texts and phone calls we make are steadily decreasing [Ofcom], replaced with internet based messaging such as iMessage, WhatsApp, Skype and FaceTime.  Therefore, flexibility on how we use our data and getting the most for what we pay for is increasingly important to consumers.

However traditional networks are stepping up to the challenger brands with customer-focused offers: Vodafone pioneered this when they launched their RED Entertainment package, giving customers the choice of free Spotify Premium, NOW TV pass or Sky Sports Mobile TV; O2 have just launched a free broken screen repair service on some smartphones on 2-year contracts and their O2 Priority service continues to entice consumers to the brand (although is it as effective at retention?); while EE offer free six months of Apple Music and free music streaming (excluded from your data allowance) and Three have just added ‘Go Binge’ data plans allowing for free unlimited streaming of TV and music.

The biggest challenge for MVNOs is building awareness and trust among consumers: it’s going to take more than free Facebook access and unlimited streaming of Phil Collins to attract your 50-something ‘late majority’ woman, who’s been with the same network provider since Donald Trump was just that orange man from the US ‘Apprentice’.

Equally, the big four need to continue adapting and listening to customers about what they need, as well as maintain high levels of customer service, competitive prices and reliable networks.

As a consumer, I want to see the best deals on things that are important to me: and if MVNOs are forcing a more competitive market that can only be a good thing! It will be very interesting to watch how this market evolves over the next few years, and if any of the MVNOs are so successful that their network partners start to rethink the terms of their agreement…


Reference: Ofcom; The Communications Report 2016

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Becky McGee
01962 842211
Article date - 19/09/2017
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