Tesco Mobile goes virtual in Ireland

19-12-2006

by Ciara O'Brien

There was good news for Irish mobile customers on Tuesday as Tesco Ireland announced it is entering the mobile market.

The retail chain has teamed up with O2 Ireland to establish itself as a mobile virtual network operator (MVNO) in the lucrative Irish market.

In industry parlance, an MVNO is a company which buys spare capacity from a network operator in order to offer its own branded mobile subscriptions without investing in physical infrastructure. Virgin Mobile is an example of an established MVNO in Britain where it uses the T-Mobile network.

Under the brand Tesco Mobile, the Irish MVNO will initially launch pre-paid services, with bill pay services set for launch later in 2007. Tesco Mobile customers will use the 089 prefix, and talks are due to begin on the issue of number portability whereby customers can keep their old mobile number if they change operator.

"The launch of Tesco mobile next year will bring new competition to the market and enable us to provide an excellent quality, value for money product for customers throughout the country. We believe that Tesco mobile will be widely welcomed when it launches," said Tesco Ireland's chief executive, Tony Keohane.

The new mobile player could shake up the market, with the possibility of cheaper mobile charges for consumers. The communications regulator ComReg has already made moves to boost competition in the market, and opened up the possibility of MVNOs setting up early last year. However, despite the initial flash of hope, there was little follow-up.

"This news will come as a shock to the market due to the regulator's (Comreg) failure to advance the market and the unofficial block on MVNO entrants -- even though Comreg did start to allocate MVNO phone numbers to hopeful MVNOs back in April 2005," said research portal MVNODirectory.com, in a statement.

Tesco's announcement could prompt other operators to follow suit. There is speculation that operators such as Dome Telecom, Eircom, Minute Buyer, Perlico, BT, Carphone Warehouse (Fresh Mobile) and Ryanair may also follow Tesco's lead and enter the Irish market.

"These companies were thought to have been looking but were unable to find an agreeable carrier. Now that O2 has broken rank with the other carriers, there could be a scrap to win MVNO market share, which in turn is ultimately overall market share."

The move follows Tesco's successful launch in the British market, where it has already won more than 1 million subscribers.

However the new operator will have some way to go to catch up in the Irish market. Rival Vodafone has more than 2 million subscribers, while O2 Ireland currently has about 1.6 million customers.

Despite the fact that Tesco Mobile will be a competitor, O2 Ireland is pleased with the deal it has struck. "Tesco Mobile will be commercially independent of O2 Ireland and in that respect will be a competitor, however we believe that this is a very exciting development in the Irish mobile market," said chief executive Danuta Gray.

It is not clear what the revenue split will be between O2 and Tesco, and a reliable industry source told ENN the details of MVNO revenue splits -- particularly in Britain -- are some of the most closely guarded secrets in the telecoms sector.