The Commission for Communications Regulation (ComReg) has today decided that the Irish post-paid mobile market is stagnant and lacks serious competition, with both O2 and Vodafone sharing 94pc of the existing market. In a bid to shake up the market ComReg has instructed both operators to allow for the hosting of mobile virtual network operators (MVNOs), a move it says will translate to a 25pc reduction or more in call costs for Irish mobile users.
ComReg said it is already expecting “vociferous” objections to its decision from O2 and Vodafone but said it would not let this deter it from this course. ComReg chairwoman Isolde Goggin said the regulator is prepared to battle it out in court if necessary.
ComReg came to its decision following a comprehensive analysis of the Irish mobile market and has notified the European Commission on its decision. The regulator has also ruled that existing national roaming agreements between operators should remain in place. Vodafone earlier today announced a national roaming agreement with 3, Hutchison’s licensed 3G provider.
Goggin said in other European countries where further competition has been developed through the entry of MVNOs, the prices paid by consumers have fallen in some cases by up to 25pc. Goggin said there were at least six operators looking seriously at providing MVNO services in the Irish marketplace.
She said the EU Commission and other regulators have six weeks to comment on ComReg’s decision. It is up to the EU Commission to approve the market review, leading to a final decision in January. Goggin described ComReg’s measures as “light handed” but warned that the regulator is prepared to conduct a legal battle with either O2 and Vodafone if they fail to host MVNOs.
MVNOs – companies that offer mobile services on the back of the infrastructure of an existing mobile operator – are enjoying widespread success across Europe. In the UK Virgin Mobile is planning an initial public offering (IPO) based on its success in the UK marketplace. However, in Ireland the country’s first MVNO, Cellular 3, was effectively pushed out of the marketplace by Eircell. Cellular 3, under the Imagine brand, acquired bulk airtime from Eircell and then began to operate as an MVNO, quickly amassing 20,000 customers through its own brand and through associates such as Spirit. Eircell’s decision to stop the service resulted in a High Court case. The court ruled that despite having 64pc of the Irish market, Eircell was not in a dominant position and was right to protect its position. Cellular 3 closed for business with the loss of around 240 jobs.
While the MVNO trend is spreading across Europe on the back of the Virgin Mobile success, and traditional firms such as Tesco are becoming MVNOs in their own right, the Irish market will present a difficult market for a new player to crack. Between them, just two operators, O2 and Vodafone, have 94pc of a market that has reached 89pc population penetration.
Goggin, however, cited Denmark with a population of five million people, as an example of a marketplace where a similar move was taken and now several operators are competing for business.
She said ComReg’s decision was based on a belief that Irish mobile prices are particularly high in the post-paid sector and that there has been little change in prices in this segment in recent years. She said there is clear evidence that other telecoms operators want access to existing mobile networks in order to supply alternative services.
She said: “This has been a long and thorough process, and we have not taken this step lightly. We have based our decision on a comprehensive, factual analysis of the market, and our statutory responsibilities under the European telecommunications regulatory framework.
“We expect there will be vociferous opposition from the major operators, but we cannot let that deter us from doing what we believe to be in the interest of competition and of Irish consumers,” Goggin added.
Gary Healy, director of market development at ComReg, said smaller operators such as 3 and Meteor may gain market share as a result of national roaming agreements, but not enough to shake up the marketplace and therefore ComReg proposes opening up the networks of Vodafone and O2 to such indirect access seekers as MVNOs.
Healy pointed to research from Merrill Lynch that highlighted Ireland as providing the highest levels of ARPU of €44.28 a month for such operators as O2 and Vodafone compared with €31.98 in the UK, €22.96 in Germany, €32.80 in France and €35.26 in Finland.
Healy indicated that while the majority of Irish mobile users are pre-paid, income from post-paid customers accounts for more than 50pc of O2 and Vodafone’s revenues.
By John Kennedy