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easyMobile, an MVNO owned by Denmark’s TDC, is promising to revolutionise the UK mobile market through cheap and transparent pricing. The company has already ignited a pre-paid price war with Carphone Warehouse’s Fresh. Yet easyMobile’s competitive prices are not just a threat to fellow pre-paid providers, but also to the UK’s network operators as easyMobile threatens not only their pre-paid bases, but also their low-tier contract segments.
Pyramid Research analyst Joel Cooper comments “easyMobile is a ‘no frills’ service characterized by competitive pricing, lack of handset subsidies, web-based operations and an inexpensive marketing campaign to keep operating costs to a minimum.” The company is offering a single pre-paid tariff that charges £0.15/min for voice calls to any network at any time and £0.05 per SMS. This approach has already sparked a price war in the MVNO pre-paid sector. In an attempt to dampen easyMobile’s entry, rival pre-paid provider Fresh launched a special price promotion on the same day as easyMobile’s launch.
easyMobile is looking to capture 10% of the UK mobile market in the medium-term, emulating the success and impact of Telmore, a Danish MVNO launched in 2001 and subsequently acquired by TDC, whose business model of aggressive pricing and simplicity has enabled it to capture 10% of the Danish market.
Cooper adds, “The ultra-low prices are unlikely to be maintained in the long-term as they are likely to be below cost, but the general price pressure developing in the prepaid sector is not something the UK’s MNOs can ignore.” Already, T-Mobile UK and Orange have signalled their intention to place greater focus on retaining pre-paid customers through lower tariffs. To a lesser extent, easyMobile is a threat to certain contract segments of the MNO, particularly customers on the lower-tier contracts who may find more value in a pre-paid service.
Looking forward, the pre-paid price war currently unfolding in the UK will be fuelled by the entry of other discount MVNOs. There is clearly a viable business model in offering a no frills, low-cost discount MVNO. If the impact of easyMobile is more severe than expected, MNOs could, as a final resort, follow other Western European mobile operators and launch their own discount MVNOs.
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