The consumer indirect channel has seen some big names falling in recent years. The demise of Phones4U was the first big sign that the market was changing, way back in 2017. Since then, the demand for indirect business has dwindled as mobile network operators focused on more profitable direct sales. At the same time, consumer appreciation for the convenience of online purchasing was booming.
These trends were evident even before the coronavirus pandemic but have accelerated over the past two years of lockdowns. Purchasing behaviours have changed for good, and digital sales now account for most consumer mobile sales.
More recently, Carphone Warehouse has been forced to take significant action and adapt quickly to survive these changing market dynamics. Gone are the mobile operators looking to pay handsomely for market share, with only one network operator brand remaining available in Carphone Warehouse today. Gone is the footfall, as customers visit stores less and less and expect to purchase online instead.
However, Carphone Warehouse appears to have pivoted and evolved their business to meet these new challenges. In 2020, they announced the closure of stores along with redundancies. They also increased the prominence of their own mobile virtual network operator (MVNO) brand, iD Mobile. ensuring they have a mobile proposition to fill the void as other network operators have scaled back their demand for indirect connections.
The future of the channel
The big question is, will we see the B2B market go the same way as the consumer market? Undoubtedly, the answer is “yes” as no industry can expect to be insulated from the digital revolution. And in a mature industry like mobile, any CFO would find it hard to ignore the opportunity to reduce costs by shifting indirect sales to direct digital sales. Surely, it’s a matter of when channel partners need to adapt, not if?
A few years ago, when all the UK mobile operators were competing for share of volume in Phones4U and Carphone Warehouse, it would have been unthinkable to say the end of the consumer indirect channel was looming. Yet here we are. Disintermediation of the consumer indirect market is a reality, and it’s a sequence of events that any Enterprise channel partner should be aware of.
However, it’s not all doom and gloom. Like Carphone Warehouse, there is the scope for bold channel partners to reduce threats and seize opportunities - disintermediation doesn’t have to be a foregone conclusion.
For Carphone Warehouse, the launch of their MVNO, iD Mobile, helped them to remain relevant. Initially focused on low average revenue per unit (ARPU) customers, Carphone Warehouse have developed their iD Mobile brand so it can now serve all parts of the market, including higher ARPU customers on unlimited data packages. This means they are able to serve the demands of both their retail and digital customers.
We are seeing similar trends in the enterprise market, where estimates suggest that the indirect market accounts for somewhere around a quarter of enterprise mobile sales. In addition, we are frequently hearing from channel partners who are concerned about the uncertainty of their indirect partnerships.
MVNO as a foundation for long term success
It’s therefore no surprise that we see an increasing number of channel partners considering MVNO as their long-term business model. Gamma and Abzorb already have MVNO propositions in place, and here at BT Wholesale we’re looking forward to plan.com launching an MVNO on the EE network very shortly. As was the case for Carphone Warehouse, an MVNO proposition has some significant benefits versus the traditional indirect model, and it wouldn’t be surprising to see more enterprise brands launching as MVNOs in the future.
Firstly, an MVNO partnership can provide much needed stability compared to the volatility of indirect. It is not unusual for indirect business to fluctuate from quarter to quarter, both in terms of volume and the share of value, as network operators flip-flop between needing and not needing indirect volumes. Our approach at BT Wholesale is that any MVNO partnership needs to provide an incentive for investment by providing long-term certainty on profitability over a three to five year period. This allows the MVNO to focus on sales and marketing without worrying about their share of margin disappearing overnight.
Secondly, the MVNO business model allows a business to acquire, serve and retain customers under its own brand. Do this job well and customers will become loyal to the partners brand and not the network operators brand as is typically the case in indirect sales. Going to market under your own brand allows a business to demonstrate innovation, and highlights the agility of these types of businesses versus the competition.
Finally, true customer ownership has significant shareholder value for any business. No matter what the long-term exit strategy is, a reseller’s business is worth more if it owns the end customer relationship and is not just a reseller or sales agency for another party.
The ingredients for MVNO success
It will be interesting to see how MVNO develops in the enterprise market over the coming years. One thing is for sure, MVNO won’t be for everyone, and success will be dependent on many factors.
Any successful MVNO needs to have a sales channel. Indirect partners can build on this by developing their digital sales and service capabilities. This may require the development of new skills and expertise, as they take control of their own mobile brand and propositions.
An MVNO also needs to establish brand credibility. In the enterprise space the host network operator is crucial, with business customers putting an increasing level of importance on this view when purchasing a mobile proposition. In fact, recent customer insight on mobile purchasing considerations from RootMetrics found that 83% of enterprise customers said that network speed was an important factor, and 93% agreed that data coverage is important. It’s clear to see from these results that network leadership is key to maximising sales.
It’s also important that enterprise MVNOs don’t just focus on mobile. Yes, enterprise mobile will continue to be essential to UK businesses. But there are further opportunities in IoT and 5G, including healthcare, security, and asset tracking.
Smart leaders who want to avoid disintermediation and build for the future should look for a partner who provides their customers with the experience they expect and has a genuine focus on wholesale.
BT Wholesale has a long heritage of working with fixed-line resellers, and through MVNO are best placed to help these partners grow into new but complementary mobile markets. It’s important to understand the challenges and opportunities of blending the two worlds together, and how it can be done at scale to successfully turn ideas into innovation.
Network capacity, speed, reliability, and quality will be huge factors in this. If connected ‘things’ are related to emergency services, then it must be underpinned by the best network.
But above all, resellers need a partner that recognises the potential of getting it right. Good partners will give resellers the freedom to do what they do best and continue delighting their customers.
Those resellers that get their act together now will most likely be the winners, at the expense of those who do not adapt. Innovators, such as plan.com, are well placed to start eating their competitors’ breakfast, lunch and dinner, feeding off the opportunities presented as the market changes. Their time is now, begging the question – is it yours?
If you need help getting your strategy in place for next year, and are ready to think like an MVNO then get in touch. We’re ready to help you unlock success.