With a growing market share, and some of the lowest prices and best customer service, MVNOs play a vital role in the market as an important competitive constraint and in keeping MNOs honest.
The UK has a healthy and competitive MVNO market, with around 150 operating at the retail level. Independent MVNOs (i.e. those not directly controlled by, or a sub-brand of, a mobile network operator) have almost 15m subscribers, representing a 17% market share. This figure could surpass 25% in 2028 based on the average growth rate for 2018-2023.
Most independent MVNOs have increased their subscriber base and market share over recent years, while the overall segment has expanded from an 11% share of subscribers in 2018. Tesco Mobile is the largest within this group, although Sky Mobile has utilised its strong brand and cross-selling opportunities to grow consistently in recent years.
MVNOs offer some of the lowest average prices in the market. The affordability of MVNO services and the tailored propositions they offer has helped support retail competition. Customer satisfaction has also been high with some of the largest MVNOs consistently recording the fewest complaints for more than a decade. This in turn has led to MNOs upping their game and improving the service they offer their customers.
While MVNOs do not build and run their own networks, they have been seen by regulators as an important competitive constraint on mobile operators, helping to offset the potential impact of consolidation on competition. In Austria and Ireland, the merging parties committed to providing access for new MVNOs to get their deals approved.
MVNOs have also been used as a popular policy lever to drive competition in the mobile market. In Norway, Nkom requires Telenor to provide wholesale access to its network for MVNOs, while the MSIT has made permanent a similar obligation in South Korea to help budget providers compete more effectively with the three established operators.
The UK’s MVNO market is dynamic and competitive relative to its peers, with strong growth prospects
The UK has a thriving mobile virtual network operator (MVNO) market, with around 150 MVNOs offering communications services at the retail level. The number of these virtual providers has grown organically over the past 20+ years, with many – at least as an initial strategy – offering a low-cost alternative to the country’s established mobile network operators (MNOs). While MVNOs often still attract and serve the more price-conscious consumer, some have also sought to secure and expand their foothold in the market by targeting specific demographics or groups (e.g. those travelling to, or working abroad in, the UK) with tailored propositions. Others have looked to play to their core competitive strengths, with Asda Mobile and Tesco Mobile able to appeal to their associated supermarket customer bases.
This is reflected in the Government’s Wireless Infrastructure Strategy (WIS), which states that some MVNOs have deepened their offering in the value chain by taking control of further aspects of the customer experience. There may also be opportunities for MVNOs to meet the growing enterprise demand for specialised services, including for wireless IoT or M2M connectivity. Large tech companies – that are already key to the value chain as suppliers of devices and operating systems – could look to become MVNOs in the future by entering into agreements with operators or by buying an existing MVNO, which could further increase competition in the market.
In the retail market, the presence of independent MVNOs (i.e. those not directly controlled by, or a sub-brand of, a mobile network operator) remains strong and growing. Most have increased their subscriber base and market share over recent years, while the overall segment has expanded, up from an 11% share of total subscribers in 2018. Using the six largest independent MVNOs as a reasonable proxy for the segment as a whole, we estimate that independent MVNOs now have close to 15m subscribers, representing nearly a 17% share of the market – see Figure 1. The majority of these subscribers belong to ‘full’ MVNOs that have built their own mobile core network and are responsible for their own SIMs and routing their own traffic. A smaller proportion belong to ‘light’ MVNOs that rely on their host for network operations and management, and focus on commercial activities and marketing downstream.
Figure 1
Market share of independent MVNOs in the UK
%
Source: Assembly
At the individual level, the largest independent MVNOs in the UK tend to be full MVNOs. Tesco Mobile is the largest (with over 5.5m subscribers, a 6.2% market share), followed by Sky Mobile (an estimated 3.5m, 3.9%). Lebara, a light MVNO, currently occupies third place (2.0m, 2.2%) slightly ahead of full MVNO Lycamobile (an estimated 1.7m, 1.9%) – see Figure 2. Sky Mobile in particular represents a competitive constraint on the country’s MNOs given its strong position in the fixed and content markets, and its range of multi-play offerings. Since launching in January 2017, it has grown at pace, leveraging a well-known brand in broadband and entertainment services to grow its mobile subscriber base and exploit cross-selling opportunities. According to Sky, it has now brought its broadband and mobile teams together to focus on the UK’s connectivity holistically, and is “scaling up” to meet consumers’ changing needs.
Figure 2
Growth of the UK’s independent MVNOs (largest six)
Subscribers (millions)
Source: Assembly
As a result, the UK is estimated to have a larger MVNO market than several of its European peers. In France, according to Arcep, MVNOs’ retail market share (as a percentage of SIM cards) fell from 12% to less than 7.5% over the 2013-2023 period. This reduction has been driven by acquisitions of MVNOs by MNOs, particularly involving SFR and most recently Bouygues Telecom through its purchase of La Poste Telecom. These developments reflect those witnessed in Belgium (e.g. Proximus/Mobile Vikings), the Netherlands (T-Mobile/Simpel and KPN/Youfone) and the US (T-Mobile/Mint Mobile), which have reduced the presence of independent MVNOs in the retail market in these countries.
By contrast, the UK mobile industry is therefore materially different to how it was five years ago, with MVNOs entering the market, offering new services (e.g. 5G) and/or attracting more customers. Should growth continue based on the average annual growth rate between 2018-2023, independent MVNOs could potentially increase their collective market share to over 25% in 2028, more than doubling their share of subscribers within 10 years – see Figure 3.
Figure 3
Growth projection for independent MVNOs
Market share (%)
Source: Assembly
The importance given to MVNOs by Ofcom and their role in improving quality and satisfaction
Ofcom has recognised the important role MVNOs play in the market. Its analysis indicates that MVNOs offered the lowest average consumer prices for SIM-only mobile services for all but three months between December 2016 and March 2021. The affordability of MVNO services and the range of tailored products MVNOs offer has helped support competition in the market. The market also creates important revenue streams for MNOs through leasing network services to MVNOs.
Consumers have also enjoyed strong customer service from MVNOs. Some of the largest (Sky Mobile, Tesco Mobile) have consistently recorded fewer complaints (per 100,000 subscribers compared to the industry average) for more than a decade. In Ofcom’s latest telecoms customer service satisfaction report, it was the MVNOs that stood out, with Tesco Mobile and Giffgaff customers having higher-than-average satisfaction (both 95% against the industry average of 87%). Tesco Mobile (95%) and Giffgaff (93%) also scored above average for value for money – see Figure 4.
Figure 4
Mobile satisfaction
Source: Ofcom
Tesco Mobile has often topped three of the measures when it comes to mobile satisfaction (overall service, reception/signal strength, and value for money). According to the 2020 report, the MVNO achieved a score of 97% for satisfaction of overall service and value for money, and was the operator most likely to be recommended to a friend. Another MVNO, Giffgaff, also achieved a high satisfaction of overall service with 95%. Both exceeded the rankings of their MNO competitors.
MVNOs have been used as a popular policy lever to drive competition in the mobile market
While MVNOs do not build and operate their own mobile networks, they have nonetheless been seen by national regulators and competition authorities as an important competitive constraint on mobile operators, helping to offset the potential impact on competition stemming from in-market mobile consolidation. In some recent four-to-three merger reviews in Europe, competition authorities have expressed concern around the prospect that consolidation would reduce the number of operators able and willing to provide access to MVNOs, while also leaving prospective and existing MVNOs in a weaker bargaining position.
As such, the merging parties have typically committed to protect downstream competition by ensuring the entry or expansion of MVNOs by reserving a share of their combined network capacity. In the following two cases, the EC considered the packages of proposed commitments sufficient to address its competition concerns and subsequently cleared the transactions:
To acquire Telefónica Ireland, H3G offered to facilitate the short-term entry of two MVNOs by selling up to 30% of the merged entity’s network capacity at fixed payments, with an option for one to become a full MNO by acquiring spectrum from H3G at a later stage. UPC (now Virgin Media) and Carphone Warehouse (using the iD brand) made use of the attractive MVNO terms, launching mobile services in 2015 – although the latter exited the market in 2018. At the time of the merger, Ireland was home to only a handful of MVNOs and the total number remains small compared to the UK – although Sky Mobile is due to enter the market using Vodafone’s network by the end of 2024. According to ComReg, MVNOs have still managed to increase their market share gradually over recent years. They currently have close to 14% of subscribers (excluding mobile broadband and M2M), with Tesco Mobile the largest MVNO (8.0%); and
In Austria, to secure approval for the acquisition of Orange, H3G offered (in addition to spectrum divestment) to reserve 30% of network capacity for up to 16 MVNOs for the next 10 years – with one agreement needing to be signed before the acquisition could be completed. Pre-merger, there were just two independent MVNOs, plus four MNO sub-brands and several resellers. H3G’s first agreement was signed with UPC in October 2012, although it wasn’t until 2015 that new players entered the market either as a result of the merger commitment or the competitive wholesale offers from the other two MNOs. Since that time, RTR data indicates that prices for different types of consumers have declined, especially for ‘power users’. EC studies also suggest that Austria is one of Europe’s least expensive countries for mobile broadband, while it has some of the region’s most data-hungry consumers. There are now around 35 MVNOs and resellers in the market, accounting for almost 16% of all mobile subscriptions (excluding M2M), up from <4% post-merger.
In addition to being a popular choice of remedy for in-market mergers, MVNO access has also been a policy intervention pursued by some regulators to drive competition in the mobile sector:
In Norway, to ensure service competition and innovation at the retail level, Nkom has determined that challengers that do not have their own mobile infrastructure will be given the right to rent access to Telenor’s network. This MVNO access obligation is imposed in conjunction with remedies for non-discrimination, accounting separation and price control (the latter being subject to a ‘margin squeeze’ test);
In South Korea, to support the ability of budget operators to exert effective competitive pressure, the MSIT has stated an intention to permanently establish the mandatory wholesale service provider regime (which requires incumbent operators KT, LG Uplus and SKT to offer access to MVNOs, but had been subject to a sunset clause); and
In Nigeria, the Nigerian Communications Commission (NCC) has granted dozens of new MVNO licences over the past year as it seeks provide competition for established operators Airtel, Glo Mobile, MTN and 9Mobile, and to help extend telecoms services to more rural, underserved and unserved communities across the country.
