Author(s): Tony Worthington
This month, UK mobile network operator Three announced the launch of Smarty, its new sub-brand, adding yet another entity that somewhat mimics a mobile virtual network operator (MVNO) to a sizeable and fascinating market.
The MVNO model started in the 1990s as a way for a provider to offer mobile communications services without needing to own network infrastructure. An MVNO in the UK can simply purchase network airtime from one of the four mobile operators and sell services to customers under its own brand and supported by its own customer care systems.
The UK market for MVNOs is considerable in size. CCS Insight estimates that there are more than 100 virtual operators in the country — although some are admittedly very small and niche — with just under 12 million subscribers.
Branding is crucial to the success or failure of an MVNO. The first such provider in the UK, Virgin Mobile, is still going strong after 18 years and has about 3 million customers. At the time of launch, parent Virgin was one of the coolest and most relevant brands in the country and this was undoubtedly at the centre of the virtual operator's rise.
The other ingredient for success involves the target audience. MVNOs are often spawned out of parent companies that sell other services to existing customers displaying strong brand loyalty. The parent launches the MVNO — sometimes independently or sometimes with another shareholder — to this customer segment and new potential subscribers with a branded mobile service. For example, the supermarket chains of Asda, Sainsbury's and Tesco all have MVNOs.
There's a broad range of virtual operators and similar entities in the UK. Telecom companies offering broadband or landline services have introduced MVNOs: BT (before its EE acquisition), Carphone Warehouse, Gamma Telecom, Kingston Communications, Plusnet, TalkTalk and Telecom Plus all now provide mobile services. Other MVNOs target specific customer segments, for example, Lebara's offering has an international focus and The People's Operator and Age UK both have a charity bias.
More recently, Sky Mobile launched a service to much fanfare, although I was surprised that it didn't bundle access to Sky TV programming with the original packages. Over time, this may become an important differentiating factor in this increasingly competitive market.
Three is positioning Smarty as a low-cost sub-brand and a potential market disruptor. To succeed, Smarty will need a strong brand message, and to target its customers with a clear and coherent marketing campaign, as well as very attractive tariff structures.
I've worked with MVNOs in Africa, Asia and Europe, and to this day, my favourite remains a brilliant market disruptor called One.Tel, which started its life in the UK in the late 1990s as an Internet service provider. Led by visionary CEO Jodee Rich, it quickly became an MVNO, and profitable in its second year. Its brand image used a mascot called the "Dude", an Australian surfer cartoon character who wore baggy shorts and tops. The company targeted aspirational "dudes" in the UK, young international residents and consumers looking for an inexpensive alternative to BT and Vodafone. It offered low, simple tariffs, great customer care and a completely different experience to that offered by mobile network operators at the time. One.Tel was young, cool, simple and successful.
Sadly, the Australian parent of One.Tel UK went into administration in 2001, ironically as it tried to migrate from an MVNO to a full mobile network operator. The UK business was sold to British Gas and then in turn to TalkTalk, where there are still legacy One.Tel staff and customers today.
Fashions change with time and although the Dude may not be the best brand image for Smarty, what One.Tel achieved in its few years in the UK is very relevant to Three and its plans for its sub-brand. The operator needs to get the right branding strategy, innovate with tariff structures and data packages, pursue a specific customer segment and keep things fun and simple.