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Wednesday, June 07, 2006


Buried deep within yesterday’s CPW figures were the results from its’ MVNO operations and what a horror of a year they seem to have had.
cpw mvno

So the UK operation (Fresh) is losing £10m a year (before support costs, depreciation, amortization and cost of capital) and more than makes up the drop in overall net profits from £73.9m to £70.5m.

I think the problem arises from the spoiler campaign CPW launched in the UK against easyMobile. After many predictions of impending doom in the pre-pay market similar to Denmark (Telmore) and Finland (Saunalauhti) experience seems to have shown nothing much has happened. Both Telmore and Saunalauhti are the poster childs for the "rip-up the market and those with most to lose will buy you out at a big profit" style of business. EasyMobile have a total of only 68k customers across the whole of its’ operations (UK, Netherlands and Germany) according to the TDC Q1 figures.

In fact things are not looking up for Fresh or EasyMobile in the UK with the launch by its’ partner network, T-Mobile, of tariffs directly competing with and undercutting its’ partners. My guess is that both Fresh and EasyMobile will be mothballed during the year. EasyMobile after the Orange court case in November and Fresh will just quietly stop being promoted in the CPW stores. Both of these discount prepay operators compete against the ultra-aggressive 3 who did perhaps the most interesting launch so far in 2006 with its’ WePay product. In this, 3 share 5p/min of its’ outrageously high interconnect charges with the customer for inbound calls. Again, I suspect that this offer is only temporary until OFCOM finally get around to regulating 3’s interconnect charges as it already does with the other MNO’s.

The mystery vendor in the discount prepay category is TescoMobile, which is actually a JV between o2 and Tesco. Every now and again it publishes the inexorable rise in its’ customer figures which now stand at over a million. Nothing is published on profit, ARPU, SACs so I have no clue as to how they are really performing.

Virgin Mobile seems to have moved out of the discount prepay bracket with its’ push into postpaid. With the acquisition by ntl, it offers a quad-play future. I suspect with the exit of Tom Alexander from the scene, Virgin Mobile will start a slow decline as tends to happen to all of ntl’s businesses.

That leaves BT Mobile and its’ earth moving BT Fusion product. Well according to BT’s year end figures the number of consumers have declined from 187k to 127k year on year, so the product has not reached really changed anything yet. BT’s Business segment is doing rather better increasing its’ base from 185k to 214k, however the SME sector is definitely an area where BT has a much, much better sales distribution network than anyone else in the UK.

I suspect out of the MNOs with MVNOs, Vodafone is doing the best out of its’ relationship with BT, although as a percentage of revenues T-Mobile probably needs the contribution more than the others.

Probably the most interesting launch is yet to happen, which is the Extreme brand launching on the Vodafone network

In conclusion, I don’t think the UK MVNO offers a lot of prospects at the moment:
- The discount SIM-free model seems to be dying a death and supplanted by T-Mobile and 3 efforts;
- The status and profitability of TescoMobile is unknown;
- VirginMobile is undergoing a radical makeover; and
- BT is pressing ahead in the SME sector.

This is probably why Carphone Warehouse and Virgin are pinning their hopes on the French market.