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In the cut-throat MVNO market, it pays to have a major mobile operator at your side.
January 31, 2024
Virgin Media O2 (VMO2) and UK supermarket Tesco have extended their joint venture agreement, meaning the current 50/50 ownership structure will prevail for another 10 years.
Tesco Mobile launched on O2's network way back in 2003, the same year that saw the commercial launch of the UK's first 3G network, and when MVNOs were fairly new on the mobile scene.
It was pitched as an extension of the supermarket's value-for-money ethos into the mobile market at a time when phones were becoming affordable for a broader swathe of the population.
However, success is hard to come by in the MVNO market, and a lot of big names have come and gone in the last 20 years, including supermarkets.
10 years after the launch of Tesco Mobile, one of its biggest rivals, Sainsbury's, launched an MVNO on Vodafone's network. The pair hoped to mirror Tesco Mobile's success by operating it as a 50/50 joint venture. Just like Tesco, Sainsbury's said its MVNO was a "natural extension" of its brand.
The problem was, the MVNO market was a lot more crowded by the time Mobile by Sainsbury's launched, and included other well-known high-street brands like supermarket Asda and TalkTalk, and another O2-backed value provider in GiffGaff.
Mobile by Sainsbury's failed to gain sufficient traction, signing up just 150,000 subscribers in its first two years. In 2015 it failed to agree an extension with host network Vodafone, and brought the shutters down on its service in early 2016.
Plenty of other big-brand MVNOs have fallen by the wayside too, including the aforementioned TalkTalk Mobile service, and Post Office Mobile – which lasted just one year.
Tech and telecoms retailer Dixons Carphone launched an MVNO in 2015 but it has since changed its name to iD Mobile following the rebranding of Dixons to Currys in 2021.
Meanwhile, Tesco Mobile kept doing what it set out to do, which was to offer value. It caused a stir in 2014 when it launched 4G services for new and existing customers at no extra charge compared to 3G. Rivals responded in kind, dispelling any notion that 4G could command a premium price tag.
The point of this potted history is to illustrate that Tesco Mobile has achieved staying power, something that has proved elusive for many MVNOs that were composed of similar ingredients.
Other heavyweight brands have joined the fray in recent years, like Sky Mobile, for example, while Vodafone is having a crack at the youth end of the market with its Voxi sub-brand. But Tesco Mobile is still the UK's biggest MVNO.
"With the combined power of Virgin Media O2 and Tesco we're an MVNO which packs an almighty punch," said Tesco Mobile CEO Jonathan Taylor. "We're incredibly proud of the success we've achieved over the last 20 years, we've gone from strength to strength and now serve over 5.5 million customers across the UK."
It's little wonder that its host network wants to stick around for another 10 years.
"We have enjoyed great success with Tesco Mobile over the past 20 years, as a partner and a network provider, and I have no doubt that will continue over the next decade," said VMO2 chief Lutz Schüler.
Nick is a freelancer who has covered the global telecoms industry for more than 15 years. Areas of expertise include operator strategies; M&As; and emerging technologies, among others. As a freelancer, Nick has contributed news and features for many well-known industry publications. Before that, he wrote daily news and regular features as deputy editor of Total Telecom. He has a first-class honours degree in journalism from the University of Westminster.
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