Research Notes

The mother of no frill MVNOs, Denmark’s Telmore, sets a new standard for bundled mobile traffic and content. A package of premium content worth €127 goes for €11/month.

Denmark has been a pioneer in the mobile industry for years. Some call fierce MVNO competition the “Danish disease” while Strand Consult considers it the wave of the future. Strand Consult’s customers who have purchased our many reports on the MVNO market know what is happening. See our knowledge bank.

Today Telmore launched a game changer. Its new flat rate package for €33 (including the 25% VAT) offers unlimited voice, SMS, MMS and 5GB of data traffic via TDC’s 4G network. On top of that, customers get a content package of 12 premium services: music, TV, movies, books, magazines and newspapers. The traffic cost is €22 and the content, a €127 value, is €11.

The premium services include Telmore Music (music streaming), Mofibo (ebooks), online newspapers (including Ekstra Bladet and Politiken), magazines (including the publishing conglomerate Egmont’s titles Euroman, Eurowoman, food magazine Gastro, and home decor Rum). In addition, there are four premium video options: HBO Nordic, TV2 Play, CMore, and MinBio. The services can be consumed on phone, tablet or TV.

The package offers a wide range of content which caters to the mass market. It will likely increase Telmore’s market share significantly and probably reduce its churn, which is already one of the lowest among operators in Denmark.

This package is also indicative of the serious attempts by HBO Nordic, TV2 Denmark, CMore and Egmont to compete with Netflix in the streaming film and TV market. Netflix has been successful in attracting customers (their exclusive English-language TV shows are popular in Denmark) but their range of new films is limited. CMore owns many of the rights to the latest movies. Not only is Telmore creating competition for Netflix by bundling four Danish streaming services, but it also creates competition for other mobile operators.

Telmore was founded 2000 as an MVNO and was subsequently sold to Danish incumbent TDC, which has maintained Telmore as an independent sub-brand with 700,000 customers. In a country of 5.5 million people, Telmore has a market share of around 11%. TDC manages a number of brands and network services and enjoys 42% of the mobile market in Denmark, 60% of fixt broadband, and 53% of the pay TV market. Clearly TDC is not afraid of the cannibalizing itself. The Telmore launch will undoubtedly eat into TDC’s lucrative pay TV business which consists of a IPTV and cable. In any case, TDC knows that if they don’t cannibalize themselves, their competitors will.

The Telmore story has been a source of global inspiration for the no frill MVNO concept. Read our research note about Telmore’s history written on the occasion of their 10th birthday. From Denmark the concept of an aggressive MVNO strategy spread to Germany with E-Plus and Telmore copy Simyo. Read our research note from 2010. Subsequently, the Telmore concept spread to other parts of the world, such as Amaysim in Australia. Read about their 2010 launch.

Telmore’s new offers raises the bar for MVNOs in the future; few are at the level of Telmore today. Indeed the Telmore concept will be interesting to cable providers that want to enter the mobile wireless industry. Indeed a number of cable providers have copied the Telmore strategy.

While consumers will love Telmore’s offer of a great value with a low price, net neutrality advocates will likely call it discriminatory. Indeed they don’t like the idea of mobile providers offering content. They say its distorts the picture for consumers who should only be allowed to purchase connectivity based on the commodity of data transport cost. However, Telmore has the ability to buy content in bulk which it offers to its customers at a lower price, essentially at a 90% discount. Telmore is a brand loved by youngsters, students, and others who value a no-frill concept.

By not allowing bundling, net neutrality and so-called consumer advocates insist that consumers pay more. They argue that the benefits of unbundled content is greater than the benefit of having a low priced content. However when a consumer can get a package of premium content and connectivity for €33/month, it’s hardly worth the time to select individual vendors for each of these services. This is the essence of a firm: it exists to lower transactions costs, and to that extent, it saves time for consumers, not to mention offering a greater value in a bundle than the sum of its individual parts.

Another important point about the deal is that it creates competition. It might be described as upstarts and the “little guys” in the Danish market finding a way to take on the powerful global players such as Netflix and Google. Especially important for the online newspaper and magazine companies, the deal offers them an important way to earn revenue as their traditional business models have been crushed by Google.

To learn more about the large corporate interests supporting net neutrality, purchase the report Understanding Net Neutrality and Stakeholders’ Arguments. To learn more about how operators can develop their wholesale business see Strand Consult’s report How a carrier’s carrier can add value to the mobile market. To learn more about Strand Consult’s knowledge of the MVNO, go to our MVNO Knowledge Center.

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