Mobile Virtual Network Operator (MVNO) market share in Australia will drop from 15% currently to just 6% by June 2023, according to a new report from Venture Insights, an Australian telecommunications / media research and consultancy firm .
The Australian MVNO market has grown from 1.5 million subscribers in 2010 to 3.4 million subscribers in 2019.
Historically, the MVNO market has driven prices down and COVID-19 boosted MVNOs in FY20, with ACCC’s latest internet activity report showing MVNO subscribers increased in prepaid segments (+ 12%) and postpaid (+ 16%). .
However, it now appears that the MVNO market (excluding MNO-owned sub-brands) has peaked in Australia.
“The announcement by Optus this week of its acquisition of Amaysim is a game-changer. With ACCC saying it does not oppose the acquisition, Optus will absorb approximately one-third of existing MVNO customers, ”said David Kennedy, head of research at Venture Insights.
“At the same time, Optus and TPG are now following Telstra Belong by creating their own low cost brands, GoMo and Felix respectively. Mobile Network Operators (MNOs) are taking the wheel of the MVNO industry and preparing to dominate the low cost segment of the market.
The MVNO market was previously expected to continue to grow, but with recent announcements for (i) the MNO Felix (TPG) and Gomo (Optus) sub-brands, (ii) Telstra’s existing strong growth in Belong and now (iii) the acquisition of Amaysim by Optus – the forecast now is that the MVNO mobile market share will increase from 15% to 6% by 2023.
“Economic concerns over COVID-19 boosted MVNOs in FY20, with ACCC’s latest internet activity report showing MVNO subscribers increased in both prepaid segments (+ 12% ) and postpaid (+ 16%), ”said Kennedy.
Consumer interest in low prices has increased due to COVID-19.
Data from Venture’s 2020 Australian Consumer Telecommunications Survey showed that among respondents who were planning to switch mobile service, 37% were looking to switch to an MVNO + MNO sub-brand and this is due to a high concentration of consumers on lower mobile prices.
This demand is probably one of the motivations for TPG and Optus to launch their new sub-brands.
Even if there is a risk of cannibalization of their own base, the lean business models offered by these sub-brands can help maintain existing margins.
5G will be a growing priority for MVNOs – Optus and TPG have announced the availability of 5G as a wholesale product.
MVNOs will push for 5G to avoid customer churn, however, the potential growth of MVNOs is likely to be moderate due to the 5G premium that price-conscious customers will have to pay.
Venture considers the acquisition of Amaysim by Optus to be a smart move, as it will reduce the risk of losing price-conscious customers.
However, the acquisition represents a significant reduction in the MVNO market at a time when all three MNOs have launched or are launching low-cost sub-brands and ACCC intervention was a possibility.
While the wholesale MVNO market may decline, increased competition across the MVNO + sub-brand space will always benefit consumers. In an initial response, ACCC said it is not proposing to conduct a public review of the acquisition.