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operator in our business model – they are our partners.’

Pulling back

becomes a scale business,’ Lonergan explains. ‘This is why supermarkets and those who have the scale tend to do well. But at the same time, the recent failures of MVNOs such as Sainsbury’s show that brand alone is not enough to carve a niche, Ru Bhikha, mobiles expert at uSwitch.com, points out. In addition, he says, operators make it hard for MVNOs to be competitive: ‘Unfortunately, shifts in the mobile market have facilitated the wing clipping of the mobile virtual network operators by the big four, who lay down strict ground rules to those paying to piggyback off their networks.’ These restrictions may include delaying access to a network’s 4G spectrum, making it harder for MVNOs to compete. In addition, Bhikha says: ‘To mobile operators, successful MVNOs that survive the market – GiffGaff, iD and Tesco Mobile – offer the same level of threat as any other rival because they typically undercut the big four to offer some of most attractive Sim-only deals on the market.’ There are two different types of MVNO: one that is reliant on the operator for everything and the other is able to function more independently. Most MVNOs are ‘light MVNOs’, which rely on 10

December 2016

using the operators’ masts and core mobile network to deliver a service, explains Rob Davis, head of converged products at Gamma. This is the quickest and cheapest way to set up, which is easier for small MVNOs. ‘But it does mean the mobile network is in full control of the service and so can restrict the services the MVNO can sell, reducing their potential market share,’ he says. In contrast, ‘full MVNOs’, own their own mobile core network infrastructure. ‘While this is much more expensive and timeconsuming to set up, it gives the MVNO much greater control of the products and services they offer and access to more segments of the market,’ says Davis. Lonergan adds: ‘Some MVNOs don’t have their own infrastructure and depend on the host for everything. Then others, such as Virgin, depend on their host for radio access but they do have a core network capability – things like billing – they invest and it gives them the opportunity to differentiate a bit.’ Taking this into account, full MVNOs, which include the likes of Gamma and Lycamobile, say they are mostly able to function independently, financially and free of operator influence. Lyca

Group chairman Allirajah Subaskaran says: ‘Lycamobile is a full MVNO, which means we use one mobile network at a time for access, but we are able to move networks should there be a failure or our contract expires. ‘We have already done this in several countries. We maintain a healthy independence from our mobile network operators but work in a highly interdependent way. We have never experienced any interference from an

But at the same time, MVNOs are not necessarily a priority for the networks. Experts say all the mobile operators are pulling away from MVNOs – apart from Three. Most operators will also consider deals that could potentially offer scale, such as Sky. According to Chris Millington, FreedomPop non-executive director and Doro UK MD: ‘Most of the networks aren’t aggressive in that area any more because it’s too difficult to be competitive, with the exception of Three, which is a very strong disruptor brand.’ Vodafone uses network performance as a differentiator in the UK, which group CEO Vittorio Colao says can make it harder to hand out MVNO deals. ‘People are not always willing to meet certain quality parameters. In other words, we will not give unlimited MVNO deals; we want to have partners.’ Colao thinks it’s wrong for the regulator to use MVNOs to increase competition. ‘It’s very

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Mobile December 2016