Brexit and the MVNO market: What does the UK’s exit from the EU mean for the industry?

Brexit. Or the ‘B-Word’ as it is becoming more commonly known, given its capacity to fracture friendships, induce hysterical newspaper reporting, and see polite dinner parties descend into finger-jabbing and Vol-Au-Vent throwing. It seems these days the ‘B-Word’ has developed a certain omnipresence, it has become the lens through which we must view all issues surrounding British politics and commerce. Hated, adored, it can’t be ignored. More so since a date for our exit was slapped on the ring-binder.

Like most sectors, the MVNO sector must begin looking at what opportunities and pitfalls await before the top chamber of the egg-timer empties of sand. Here, we look at some of the most pressing of each.

 

Roaming charges

Met with overwhelming consumer delight, on June 15th, 2017, it became an offence for operators to charge additional roaming fees for data usage, voice calls, and SMS to customers travelling throughout the EU. The initiative was less popular with mobile operators and MVNOs who had to find alternative means of bridging the shortfall. Sitting outside of the EU, UK operators and MVNOs will be free once again to introduce whatever charges they like to customers on the continent.

However, operators and MVNOs might want to take a moment before cracking open the Moët & Chandon. The ‘roam like at home’ concept has been wildly popular with consumers. Even the most ardent Brexiteers will grimace at the thought of stumping up close to €50 to listen to Rule Britannia on Spotify whilst queueing to get inside the Louvre. This being the case, alignment with ‘roam like at home’ looks the most likely route for most MVNOs.

Ethnic minority focused MVNOs

A great advantage MVNOs enjoy is their dexterity. They do not tend to buy hardware, usually offering SIM-only deals rather than subsidising handsets and have no need for network infrastructure spending. As such they have been able to service niche markets with comparable ease.

Ethnic minority focused MVNOs however, look set to become the first to run into difficulties. The likes of Lycamobile and Lebara Mobile which target migrants and differentiate themselves by offering cheap overseas calls face specific threats from Brexit.

Largely, the threat stems from a reduction in migrant numbers already evident in government figures. Not only would the likes of Lycamobile see a decline in customers, but they will also see a decline in the availability of the languages skills they so heavily rely on. Bringing workers in from the EU to compensate for this gap will diminish as freedom of movement is curtailed.

The concern then is, that ethnic minority focused MVNOs based in the UK, start to see relocating to the EU as the more viable option.

More broadly, if other MVNOs see Brexit as a threat to their business models, the operators might be less inclined to make space for newer, smaller outfits and begin a process of consolidation that creates an environment only the bigger MVNOs can survive within.

Regulatory confusion and rising costs

This depends very much on the type of Brexit the UK ends up with. If there is full extrication from the EU on all fronts, then MVNOs will essentially have two sets of regulations to abide by. Those devised in the UK, and those that remain and are amended in the EU. Essentially, efforts to attain regulatory compliance will have to be doubled. Should the European Commission seek to revise its rules surrounding telecoms in a way that disadvantages UK MVNOs, they will have no means of influencing the conversation.

The worry of course, is that all this could lead to a rise in costs. MVNOs are better placed than the operators to absorb these costs. As mentioned above, they tend not to invest in hardware, subsidise devices or spend on network infrastructures.

However, if it is to be the operators that are hit hardest by spiralling costs, the likelihood is that these will get passed onto the MVNOs.

Final thought

As much as no-one wants it to be the case, right now Brexit and what it will look like is about as clear as a quadratic equation, written in ancient Aramaic and viewed through a plank of wood.

MVNOs though, are better placed than most to respond to the uncertainty. With little invested in hardware, famously responsive to customer demands, and with a track-record of innovation and differentiation, sticking to these core tenets should hopefully see the market-place continue to thrive.