MVNO easyMobile Ignites Pre-paid Price Wars in the UK
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.
