O2 goes for growth with MVNOs

Having soundly beaten its competitors in subscriber growth--significantly helped by its iPhone exclusivity--O2 is now looking for new routes to increase its lead by providing increased support for its MVNO partners.

Tesco Mobile (part of the Giant Tesco Supermarket empire), which is already one of the UK's most successful MVNOs, is an O2 partner and will shortly have access to the iPhone handset. This move is seen as O2 wanting to use Tesco's proven access to the budget and prepaid market, as well as triggering additional competition for Orange and Vodafone. This strategy also provide O2 with much lower customer acquisition costs while boosting mobile data revenues as already seen from existing O2 iPhone users. 

While Tesco Mobile, which is 50 per cent owned by O2, is thought likely to offer cut price iPhones, other industry watchers believe Tesco Mobile will follow the incentives other iPhone operators are providing, such as free movie tickets to free home broadband lines, or double/triple Tesco loyalty points redeemable against grocery purchases.

"We'd love to bring a bit of Tesco value to the iPhone and offer something very different to what is out there," said a Tesco Mobile spokesman.

O2 has also launched its GiffGaff MVNO where members can get free services in return for participating in the community by answering support queries or submitting marketing ideas. Such contributions, all designed to reduce the costs to O2 of running the operation, earn points, which can then be exchanged for cash, mobile credit or charity donations twice a year. Of note is GiffGaff's copying of techniques successfully used in other sectors such as travel, where sites like Trip Adviser rely heavily on user input.

A suggestion put forward by one analyst is that the world's largest MVNO, Virgin Mobile, could become unsettled by the merger between Orange and T-Mobile and look for another strategic partner - which either O2 or Vodafone could comfortably fulfil.

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