Have you got an MVNO yet?
For anyone in the Service Provider market, mobile virtual network operators (MVNOs) are a big deal. MVNOs account for over 10% of global mobile users, and make up 17% of the UK’s mobile market. Considering that’s close to Vodafone’s own share, then you can’t deny just how popular they are.
As the MVNO market continues to grow, there will be brands out there interested in launching their own. Those that have their eyes on MVNOs need to know the dynamics and complexities of the market. Expert insights and opinions are precisely what’s needed.
Gamma’s Managing Director for Service Providers Mike Mills sat down with James Gray, Managing Director of Graystone Strategy, to discuss those talking points. From mergers and tariffs to regulations and growth, there’s more than enough to cover.
The drama of the Vodafone and Three merger
“It’s been like an episode of Friends. Would they, won’t they, and then finally they did.”
It’s been going around the UK mobile industry for a while. Vodafone and Three UK are pooling their resources together, and it’s going to have an impact. Consumers and wholesale deals themselves won’t escape from those shockwaves.
In just one move, the number of UK carriers has gone from 4 to 3. The Competition and Markets Authority (CMA) had a good look at this merger, weighing up the positives and negatives. Competition would most certainly be affected, but the benefits around a “bigger, stronger mobile network [and] a better customer experience” put things in perspective.
That merger was only allowed to proceed after both parties committed to invest £11 billion in a combined 5G network.
For James, it gives competitors like O2 and BT a chance to win some customer share from MergeCo while they’re distracted by the merger. O2’s own spectrum has recently expanded, meaning customers can be targeted with “richer offers with more usage.”
Consumers will be inundated with offers from MergeCo, the other operators and even MVNOs themselves. The Vodafone/Three combination will own 32% of the market, meaning that we’ll have 3 operators “roughly equal size in terms of consumers.” A larger number of cell sites, however, may swing the market in MergeCo’s favour.
“The most aggressive market in Europe”
That’s how Mike describes the UK mobile network. MergeCo will improve 5G capabilities, but it comes at a time when it’s challenging to invest in the network itself. The cost of acquiring and running that network means “those economies just don’t add up.”
Mobile network operators (MNOs) are guilty of getting excited about, and then overselling, “the next G.” While at Vodafone, James was heavily involved in the release of 2.5G, and now we’re heading towards 6G. All this comes before a standalone 5G has been launched in the UK.
Right now, all we have is the “Diet Coke version of 5G.”
Consumer data demands change constantly, especially when there were 88.4 million cellular mobile connections in the UK at the start of 2025. More powerful phones and our online habits means average data usage continues to rise.
The CMA were mindful that the Vodafone/Three merger didn’t cause rising prices. They identified several low-cost tariffs from those entities that had to stay the same. While consumers enjoy no inflationary rises, MVNOs must compete with those lower prices.
MVNOs operate on those lower costs, and the reduction in carrier numbers could mean that they had “25% less doors to knock on.” This led the CMA to instruct MergeCo to put reference offers out in the market, with the whole point being “to drive competition.” Either way, MergeCo will be in the CMA’s sights to make sure they’re supporting the growth of MVNOs.
James fully expects MergeCo to be “very pro-wholesale” and bring new networks and new opportunities to the market. Only time will tell.
We need to talk about regulations
Some say it’s the “driest subject in telecoms”; those people are wrong.
In terms of MVNOs, the UK is the least regulated market. Licenses are required in other territories, but in the UK, all brands need are a commercial deal with an operator and proof they “can deliver against the general conditions.” Those are basically customer protections around billing and service.
In 1999, Virgin launched the world’s first MVNO, Virgin Mobile, and the market has only grown since then. Operators are now more focused on driving competition, which can create growth for both current and prospective MVNOs. The reference offer put out by MergeCo may encourage those MVNOs to look and see what it’s all about.
Providers will now have to “sharpen their pencils” and deliver the service they promised. Wholesale deals have been covered by NDAs, but the market is now becoming “more translucent”.
Abroad, there’s plenty of change afoot. Vodafone sold its Spanish business, and Digi Communications agreed a deal with Telefonica to become a full MVNO. In France, MVNOs have transitioned to network operators, and there have been operators becoming MVNOs over in Africa to focus on the consumer side of things.
It’s an interesting dynamic, and James personally thinks the UK’s “got it about right.” Low regulatory barriers to entry and a lack of expensive licenses encourage MVNOs to compete, especially when marketing conditions ultimately prevail. Ofcom and the CMA, however, will make sure MVNOs don’t get “squeezed” by the larger market forces.
The multi-play way
Considering MVNOs take an operator’s infrastructure and “[wraps] their brands and services around it”, there’s plenty of opportunities for growth. That multi-play environment i.e. packaging multiple services under one brand is one of those opportunities.
It comes at a time when consumers are more comfortable about buying multiple services from just one brand.
It’s not an uncommon sight; after all, British Gas started life as coal gas and coke supplier, and was the UK’s leading electricity supplier until 2024. Any broadband altnet organisation can easily add mobile to their portfolio, especially with the rise of mobile virtual network aggregators (MVNAs). Through them, those services can be incorporated with ease.
James notes two use cases for that addition:
- Failover: In case a fiber cable is cut, a mobile backup SIM to maintain connectivity and service.
- Address householders rather than the house: Sell mobile services to individuals rather than just one fiber subscription to the premises.
When consumers buy more services, they become “more entangled.” That challenge of churn can be addressed, and those brands don’t have to devote so much time to acquiring new customers.
It does cost 5 times more to acquire new customers than retain them, so that’s always a positive.
Why do MVNOs fail?
Graystone Strategy advise a lot of MVNOs, and James admits they spend more time advising to not launch an MVNO. Sometimes, it just isn’t the right solution, and there are consistent themes behind their failures.
One is forgetting the end customer and instead focusing on the “big black boxes with green flashing lights.” The proposition should come first, with the technology following. Telecoms is a very tech-focused business, and customer experience becomes an afterthought.
Ultimately, MVNOs are a “customer acquisition and customer retention business.” The marketing and the service itself must be up to scratch, or else the MVNO will fail.
Then there’s the “pet project scenario.” Someone within the organisation has the vision, but it’s one that nobody else shares. Those visionaries can “jump around a lot”, and if the project loses its excitement, that “marketing horsepower” dries up.
James also mentions how some don’t “understand the game”, which is needed in a complex environment like telecoms. MVNOs are built on subscriptions, and if nobody knows how to manage it, then it won’t get very far. Either the capability needs to be brought in, or it must be outsourced to experts.
Finally, there’s general naivety. Cutting prices to compete with established operators and having a “me too” mindset doesn’t work in the MVNO market. It’s all about offering that valuable service that stands out from the crowd and delivers something meaningful to customers.
Ready to join the market?
Market conditions are currently favourable for MVNOs. Regulations support growth and entry, and “air cover” from Ofcom and the CLA will help get them off the ground. Technological innovations around eSIM can improve service offerings, especially when aimed at younger generations who “have never known anything except a mobile phone.”
The UK was home to the first MVNO market and remains an exciting place to operate. Opportunities around additional services and using “your telecoms business to make money out of your core business” only makes things more interesting. As Mike reminds us, customer access and the brand itself “is the key driver of MVNO today.”
For any brand looking to expand into the MVNO space, Gamma has an established reputation. We can supply those tailored solutions designed to foster customer loyalty and drive meaningful business growth. While there are numerous dynamics to contend with, that expertise is vital.
Support like that makes launching an MVNO more than just a smart choice – it’s the right choice.