3 UK looks for more MVNOs to meet Virgin challenge

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3 UK looks for more MVNOs to meet Virgin challenge

By CAROLINE GABRIEL

Published: 22 June, 2009

READ MORE: UK | MVNO

As if the UK mobile market were not already overcrowded, the number of MVNOs is mushrooming, and the major carriers are fighting to attract these virtual operators to their 3G networks to create new revenue streams, as direct consumer services suffer from rapidly deflating margins. 3 UK - which has already largely embraced the role of its network as a 'bitpipe' to support third party internet brands as well as its own broadband services - is pursuing the next logical strategy, to support other operators as well as partners like Skype.

3 has reached a deal with MVNO aggregator x-Mobility to sign up new virtual partners, which will use 3 capacity to deliver their own-branded services, according to Mobile Today (www.mobiletoday.co.uk). The newsletter speculates that this is primarily geared to challenging the business of the largest UK MVNO, Virgin Mobile, which has 3m customers and is 3's biggest head-on rival in low cost 3G offerings. Virgin uses T-Mobile's network (part of which will soon be merged with 3's under their RAN sharing agreement), and recently started offering prepaid dongle-based mobile broadband, a key competitive challenge to 3, which has been a pioneer in this area.

The MVNO model works best when the various operators are clearly segmented, targeting precise and preferably underserved user bases, but these are hard to find in the crowded UK, and many will be looking to the hoped-for 200% penetration - ie, consumers and businesses taking out second or even third subscriptions for new services such as mobile broadband.

X-Mobility will bring six companies to 3, including iCard, which targets the prepaid calling market, and Catalyst, which focuses on small businesses and students. Mobile Today expects X-Mobility to concentrate on prepaid voice deals, with 3 itself focusing on mobile broadband. It quotes Strategy Analytics' head of wireless practice, Phil Kendall, saying: "MVNO prepay churn is very high, as it's a base of users that aren't remotely loyal to operators and will just go after the cheapest. Around three million Virgin Mobile prepay customers are up for grabs."

Many voice-oriented MVNOs are expected to follow Virgin into mobile broadband soon, notably Tesco, which already started selling 3G-enabled laptops in its retail stores, and could add data services to its virtual service soon.