Tesco's MVNO plan reflects growing MVNO confidence

It was reported this week that Tesco hopes to take full control of its MVNO in the UK should CK Hutchison succeed in buying O2 and merging it with Three. According to the report in the Telegraph, Tesco Mobile has aspirations to "invest in a renewed attack on the value end of the telecoms market". This also represents a major shift by Tesco, which has previously explored selling its MVNO business.

Life as an MVNO can be tough, as frequently highlighted by the numerous failures over the years. A report from GSMA Intelligence last year said 210 players have either merged or ceased business over the past 15 years, indicating that the MVNO business carries a certain amount of risk and requires careful planning with a good business model in place.

Indeed, it has become apparent that MVNOs need to offer much more than low-cost phone bills. Value-added services and segmentation are now regarded as essential elements for success -- a message that has been taken on board by recent launches such as FreedomPop and iD Mobile.

MVNOs have also suffered from a lack of clout in the market, with mobile network operators generally calling the shots. Last July, MVNOs in Europe attempted to address this situation with the creation of a new association called MVNO Europe in order to give them a stronger voice in Europe's changing regulatory landscape.

Now, a new report indicates that MVNOs are also starting to gain confidence. The study carried out by Telesperience on behalf of Amdocs found that MVNOs are generally bullish about their future, with around one-third believing their revenue would grow by 26-100 per cent in the next two years, and 25 per cent believing it would grow by more than 100 per cent. None predicted a decline, although around 8 per cent said that they didn't think their business would grow during this period.

In addition, as MVNOs have been and continue to be used as remedies in proposed telecoms mergers, these virtual operators appear to be entering a new era when they will wield more power and have a greater impact on the overall make-up and availability of consumer mobile offerings.--Anne

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