SIM-only price war triggered by UK supermarket MVNOs

Two of Britain's largest supermarket MVNOs have opened a price war by offering increasingly lower SIM-only deals. Asda Mobile has launched its unlimited calls and texts for £25 per month, undercutting its main supermarket rival, Tesco Mobile, by £5 for the same level of SIM-only offering.

According to Strand Consults analyst, John Strand, this move by Asda Mobile will provoke Tesco Mobile into a quick price cut of its SIM-only tariff. "A price war of this kind will have an impact on retailers' commissions and subsidies, as it could lead to much more focus on SIM-only and not as much on devices. It will also force operators to lower their tariff prices as well."

He added: "A £25 tariff is cheap, particularly from a UK perspective. What you will see now in the UK is a price war where you have the operators on one side and the MVNOs on another and this will lead to a price war. We have already seen this happening in Holland, Germany and Denmark."

This viewpoint was added to by the market research firm Ovum claiming that 'no frills' operators would see an uplift in sales over the next five years and supermarkets would be well placed to take advantage of any interest.

Ovum analyst Jeremy Green said: "Connectivity is increasingly perceived as a straightforward commodity, so we expect to see an increase in the 'no frills' market, driven mainly by the supermarkets. Perhaps predictably, Tesco, which partnered with O2 to launch Tesco Mobile in 2003, is one of the most successful in the 'no frills' mobile arena and has been able to expand its offering into Ireland and Slovakia, where both parties are present."

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