UK MVNO Market More Relevant Than Ever

The UK has long been characterized by its vibrant market for mobile virtual network operators (MVNOs). Indeed, it played host to the world’s first MVNO, Virgin Mobile, which launched on the One2One network in 1999. Since then, dozens of others have followed suit, helping create the diverse and highly competitive mobile market in place today.

I’ve always been interested in the MVNO model; it’s a springboard for players from outside the telecom space to quickly and affordably enter the market and offers opportunities for companies of different sizes to target niches that may have been overlooked by the main networks.

MVNOs tend to perform best during periods of economic uncertainty by offering affordable and flexible rate plans as an attractive alternative to the main network operators. It has been no surprise to me then, that cost-of-living concerns following a period of high inflation and rising interest rates have supported recent growth for the sector.

Last month, CCS Insight published a detailed Insight report on UK MVNOs, reviewing recent developments and assessing the main players (see UK’s Vibrant Market for MVNOs Keeps on Growing). It highlighted a market that added 1.2 million net new customers in 2023, equivalent to growth of 8%. This compares with just 2% for the four network operators, excluding machine-to-machine connections. Our research shows that MVNOs now represent 18% of all UK retail connections.

This analysis excludes sub-brands such as giffgaff, Voxi and Smarty. This is because even though they compete in a similar way to MVNOs, they are owned by the network operator rather than being a separate company piggybacking on its infrastructure.

The dynamics of the UK MVNO market have recently been thrust under the microscope in relation to the planned merger between Vodafone and Three. The Competition and Markets Authority has expressed concern that the joint venture could stifle wholesale competition by reducing the number of potential network suppliers for virtual providers. Concessions or remedies involving current or future MVNOs could play a major role in its outcome.

But this week, Vodafone and Virgin Media O2 highlighted opportunities for MVNOs as part of an extended network-sharing deal predicated on the deal being approved. Their argument is that three “high-quality, scaled wholesale competitors” would offer a better choice.

According to our research, the top five MVNOs in the UK by number of customers are Tesco Mobile, Sky Mobile, Lebara, Lyca Mobile and iD Mobile (see below). Between them, they represent just over 85% of the total MVNO market. But there’s also a long tail of dozens of other virtual providers, some with just a few thousand customers. Our report profiles each of the leading players and summarizes others that have caught our attention.

The report also reflects on the share of MVNO connections among the UK’s four networks. Virgin Media O2, which hosts the two biggest virtual providers — Tesco Mobile and Sky Mobile — is the clear leader, housing more than half of all connections, at close to 10 million. EE, buoyed by recently securing Lyca Mobile from Virgin Media O2, and Vodafone, which supports Lebara, each have about 15%. Three is fourth with 11%, almost entirely thanks to iD Mobile.

Not all UK MVNOs have been a success: Mobile by Sainsbury’s failed to get close to matching the take-up achieved by its supermarket rival Tesco before Vodafone terminated its contract; a service from the Post Office struggled against strong competition and shut down in 2016; and ad-funded providers Samba Mobile and Blyk failed to make their innovative business models work.

But the role of MVNOs in the UK telecom market is as important now as it’s ever been. With household budgets remaining squeezed, their simple, competitive and flexible offers are resonating with customers. Yet in the background, the Vodafone–Three deal threatens major disruption and the watchdog’s stance could have a major influence on their future.

A busy and potentially transformational period in the UK MVNO market awaits. CCS Insight will continue to monitor it closely.