Robin Hood is alive and well
– and has taken the form of a discount mobile service provider, but this new Robin Hood comes with a twist.he is open to mergers and acquisitions. At the end of the day, the mobile operators have to pay – to get their customers back…!
More information “The Moment Of Truth” – A Portrait Of The Discount Mobile Service Providers Success”
The discount mobile service providers are a modern-day Robin Hood – but with a twist. The discount mobile service providers have earned the “Robin Hood”-synonym because they have ensured that mobile users can save a huge bundle on their mobile bill. Because of this the discount mobile service providers in Denmark have – within just a few years – been able to build up substantial customer bases. And many of their customers have come from the established mobile operators. And the twist..? At the end of the day these “Robin Hood”-companies can and will sell the customers they “stole” from the mobile operators back to the mobile operators – at a huge profit! This exact scenario has already happened twice in Denmark.
There is little doubt that the established mobile operators would have preferred a life without the discount mobile service providers – for the simple reason that these companies both “steal” their customers and dump mobile prices. Because it is so relatively easy and inexpensive to start up as a discount mobile service provider, all these new discount mobile service providers will lead to a fragmentation of the European mobile market. New discount mobile service providers will usually be able to establish themselves for less than 2-3 mil. Euro and can operate with tiny fixed costs – even the large discount mobile service providers only have around 40-50 employees.
In addition to theses low entry barriers, there are a number of reasons why mobile operators – whether they like it or not – actually try to attract competitors to their networks. First of all, most mobile operators have capacity to spare on their mobile networks. This capacity can be turned into a profit by entering into a service provision agreement with a discount mobile service provider, enabling that service provider’s customers to call on the operator’s network. New discount mobile service providers can also be of special interest to the mobile operators, as some of these service providers – in a short space of time – will see an explosive growth in their customer base.
For a mobile operator it is essential to enter into service provision agreements with those discount mobile service providers that after a while will become successful – as it is those “Robin Hood” companies that, over time, will be most interesting to purchase.
Denmark has shown the way regarding discount mobile telephony and we have already seen on this market that the mobile operators have purchased the two most successful discount mobile service providers. The mobile operator TDC Mobil acquired full control over the discount mobile service provider Telmore in January 2004 and the mobile operator Sonofon acquired the country’s second largest discount mobile service provider CBB Mobil in April 2004. In both cases the discount mobile service provider had entered into a service provision agreement with the operator that later acquired them. TDC Mobil paid an estimated 61 million Euro for Telmore – around 134 Euro pr. customer and Sonofon paid an estimated 20 million Euro for CBB Mobil – around 104 Euro pr. customer.
This whole dilemma about the discount mobile service providers – getting them started – and then having little choice other than purchasing them when they are at the peak of their success, has been analysed in detail in the mobile report “The Moment Of Truth, 2nd. edition – A Portrait Of The Discount Mobile Service Providers Success”, from Strand Consult. This report has just been updated with the latest information and figures and is based on the very successful report about discount mobile telephony in Europe.
“Can’t live with them – can’t live without them” – describes perfectly the whole issue of the mobile operators odd relationship to these “Robin Hood” companies. The discount mobile service providers have knocked the bottom out of the whole mobile market – in Denmark the price for a voice minute dropped by 50% in just 10 months! Yet some mobile operators are so dependant on these discount mobile service providers that they dare not risk loosing them. It was this dependency that pressured TDC Mobil and Sonofon to purchase Telmore and CBB Mobil – and we will see exactly the same scenario repeat itself across Europe in the coming years.
A mobile operator can simply have no choice but to take over a successful discount mobile service provider that the operator already has a service provision agreement with. When TDC Mobil purchased Telmore, TDC Mobil had themselves 1.562.000 mobile customers, while Telmore had a substantial 454.000 customers. In other words, Telmore generated a substantial part of the mobile traffic on TDC’s network. Also it was Telmore that clocked in the highest growth rate of the two companies – adding new customers into TDC Mobil’s total customer base.
So there were in fact a number of factors that led to TDC Mobil’s purchase of the “Robin Hood” company Telmore. For the first thing – they made sure that no competitor could suddenly purchase Telmore and their almost half a million customers. Secondly, TDC Mobil could also thereby avoid having to split customer traffic revenue with Telmore and finally, it was simply cheaper for TDC Mobil to give Telmore 61 million Euro for 454.000 customers – instead of having to go out and attract the same number of new customers using their traditional means – i.e. by subsidising new mobile phones.
European mobile operators may as well get used to the idea that they will almost be forced to have to purchase the very companies that have worsened their business and earnings. A successful discount mobile service provider can generate so much traffic on an operator’s network, that the discount mobile service provider simply becomes too important to that operator’s business.
This is of course knowledge that the entrepreneurs of new discount mobile service providers understand and will influence how they try to build up their business, so they can after just 3 – 5 years almost force their operator into purchasing them. Some of the customers that the operator has purchased will be their own former customers – that had at some stage switched to the discount mobile service provider’s cheaper tariffs. How ironic that the mobile operator is buying back customers he used to own himself in the first place – customers that have helped the discount mobile service provider make money and the operator loose money..! But there you go – that is that innovative twist of having a modern-day Robin Hood in the mobile business.