There are many aspects MVNOs should consider now, rather than waiting until the deal is approved.
When Vodafone confirmed it was in talks to create a joint venture with Three UK, it put to bed weeks of speculation. Though market consolidation has been on the cards for a while, there’s still a lot that needs to happen to gain approval from the Competition and Markets Authority (CMA) and Ofcom.
The MVNOs that run on the networks of BT and Virgin Media O2 (VM02) must review what this means for their business, customers and strategy. For some, it could trigger a review of their market proposition and whether they are on the right network to achieve it. For others it’s a chance to reconsider pricing models. For a select few it could be time to commit to an exit strategy.
All MVNOs should run a review with these six things in mind:
Managing network integration
The biggest task for any JV or merger is melding technology. It’s always disruptive and customers’ experience can suffer as networks are brought together and planned network developments and enhancements slip.
It’s not uncommon for network disruption to translate into degradation in service and cause consumers to shop around. This is when MVNOs running on alternative providers can strike, especially if they have used the time running up to the JV approval to enhance their customer experience and service.
BT and VMO2 will be aware of these factors and it presents them with an opportunity to attract established and fledging MVNO brands. They will therefore watch the CMA’s moves with acute interest.
Synergies, efficiencies, and cost savings
Hosted MVNOs will want to understand what the proposed merger really means in terms of pricing and value. Will they get a better wholesale deal or more network for their money? Better speed, 5G coverage and innovation will be high on their lists of expected benefits.
Depending on how the RAN technologies are integrated, there could be quick fixes to allow national roaming, followed by a more strategic rationalisation of sites and equipment in the longer term. Expect MVNOs using the new JV’s infrastructure to seek reassurance that service levels will be maintained whatever the solution, and a commitment that they will be granted access to the new bigger network as a wholesale customer.
What hand will the regulator have in the network debate?
We don’t know whether the regulator will intervene to ensure the merger does not reduce competition or adversely impact pricing for consumers, but we should expect it.
We’ve seen regulators introduce measures to other markets to make them more MVNO friendly so that challenger brands can still drive competition. When O2 and Three merged in Ireland, the regulator stipulated that the merged entity must issue two new MVNO licences and launch (on a specific set up and wholesale deal) within 12 months.
The UK already has many MVNOs, so new entrant obligations might not be considered necessary. But the regulator could consider some form of mandated wholesale pricing to ensure MVNOs can compete.
Whether there is regulatory support or not, all MVNOs should see this as a point of market inflection and review their propositions. They need to ensure they can respond quickly to changing customers’ needs because that is a sure-fire way to retain customers and acquire new ones.
There are other factors beyond the network or pricing: digital services should feature on the technology roadmap too, whether that means innovation in the form of WhatsApp chat bots, true multi-channel customer service, or enabling customers to fulfil more of their journeys digitally through better apps, websites and even e-SIM.
Customer loyalty matters more than ever
If there is disruption, keeping customers happy will be a big deal for MVNOs running on the JV infrastructure. They should think about how to manage customers through the lifecycle. Is now the time to fire up loyalty programmes and give extra value to long standing customers? Where does investment in marketing tech and AI fit in? How can this tech be used to build one-to-one marketing programmes that drive down churn and build advocacy?
More specifically, where rewards are overt, it’s essential that people continue to believe their loyalty and custom is valued. Where rewards are more convert and targeted, MVNOs should consider investing in their high-risk customers or at the very least, those most effected by the integration to ensure they stay engaged. This is a chance for MVNOs on other networks to up their game.
Are you match fit?
What makes a successful MVNO today is a question every MVNO should be asking. Stepping back is a way to move forward in a market like this. Every MVNO should be 100% clear on who their target audience is and check the services on offer are designed to delight people.
It’s not unusual for some MVNOs to find they’ve drifted away from their original vision, so
putting punchy and relevant messages into the market is essential. A quick refresh could make a real difference.
Most of all, MVNOs need to ask if their offering is still differentiated in the market? Are they delivering real customer value to their target customers? Are they leveraging all the assets that they have whether that’s a retail base, unique tech or insights that tell them what customers really want?
Don’t forget, as the ‘synergies’ play out in redundancies, there could be some very talented people on the job market who can help answer these questions. Look out for newly available skills to stay match fit.
Time to exit?
Finally, if the proposed joint venture goes ahead, it’s extremely unlikely that there will be any more mergers of mobile operators the UK. Where does this mean? Well, if a mobile operator wants to grow through acquisition, then buying up MVNOs could be a sensible way to boost both customer numbers and retail revenues. It’s something we have seen happen in European markets so why not the UK? As such, is it time for some MVNOs to think about an exit?
There’s a lot to think about, so waiting the deal to be approved is not a realistic option for MVNOs. Carpe diem.
About the author
James Gray is Managing Director of Graystone Strategy who specialises in market consolidation and MVNO strategy, having launched Sainsbury’s Mobile, Asda Mobile and TalkTalk.