Advent of MVNOs will impact ARPU rates

8 Aug 2005

The arrival of mobile virtual network operators (MVNOs) into the Irish market could reduce the high average revenue per user (ARPU) rates enjoyed by dominant players Vodafone and O2 by as much as 35pc, new research from analysis firm iReach claims.

At present, more than 100 MVNOs are entering the mature European mobile market. However, while none have launched in Ireland recent efforts by ComReg with the support of the EC, will see the main networks opened to MVNOs possibly as soon as before the end of the year.

According to iReach, the Irish mobile market is worth almost €1.5bn and boasts over three million subscribers which no doubt makes it an attractive market for MVNOs due to the high ARPU levels enjoyed by the two dominant market players, Vodafone and O2, which are the highest in Europe. For example, Vodafone’s customers in Ireland have an ARPU rate over 100pc higher than their German counterparts.

A decision by ComReg to open up the market to MVNOs as a means to introduce competition in light of the fact that O2 and Vodafone have over 90pc of the available market is being challenged by O2, Vodafone and Meteor, who are appealing the decision to the Electronic communication Appeals Panel.

According to iReach analyst Enda Kelly, the introduction of MVNOs to the Irish market is likely to significantly reduce Irish ARPU rates by as much as 35pc. “Therefore it will be necessary for current network operators to increase their revenues elsewhere,” he explains.

Among the various providers looking at operating as MVNOs in the Irish market are Perlico, BT Ireland, MinuteBuyer, Smart Telecom, Tesco and T-com. Another possible entrant to the fray could be budget airliner Ryanair.

While network operators take the view that revenues can be increased by offering more technically advanced products – such as multimedia capabilities combined with voice – to increase overall market revenues, recent reports on MVNOs suggest they are more likely to focus on attractive voice minute packages to grow their market share.

“While it remains to be seen if 3, and the recently acquired Meteor, can really impact on the might of Vodafone and O2, the inevitable arrival of MVNOs will affect them,” estimates Kelly. “MVNOs by their nature will cherry-pick customers with likely revenue losses for Vodafone and O2 in the high-revenue areas such as the corporate sector.

“As the MVNO market matures stronger competition will be seen in more traditional market segments such as individual household users with strong competition for MVNOs who already operate fixed line networks such as Smart and BT Ireland.

“However, it is not all bad news for the network operators. As the MVNOs piggy-back on their network there are opportunities to sell excess network space and maximise its network use,” says Kelly.

By John Kennedy