The past few months have witnessed the start of a huge shakeup in the UK mobile and telecoms industry, as BT buys EE and Hutchison Whampoa (owner of Three) makes a bid for O2.
Sky recently announced the creation of its own mobile brand as a Mobile Virtual Network Operator (MVNO), piggybacking on the O2 mobile network, so what’s the deal with Sky’s plans and what will it mean for consumers?
Sky to launch mobile service 2016
Sky is very well known in the UK as a broadcaster and content provider for satellite (and Internet-based) television, but the addition of a mobile network allows it to launch ‘quad-play’ services and appeal to more consumers.
Sky has publicly stated that its network will launch in 2016, unaffected by the recent announcement of Three’s deal with O2’s owner Telefonica. Sky won’t actually deploy its own 4G network, but will use the O2 infrastructure in a similar arrangement that Tesco and TalkTalk already have.
Three and O2 merger
Hutchison Whampoa is in discussion with Telefonica to purchase O2 for a just over £10 billion, but O2’s tie-up with Sky is unlikely to affect this merger – Sky’s MVNO will use the same network infrastructure whatever comes to pass.
There have been hints that Sky’s entry into mobile will be considered favourably by the EU regulators, who will be examining the Three and O2 merger very closely. Having Sky in the mix should in fact lead to more competition, and possibly better deals for consumers.
The UK market has already seen quad-play becoming more popular – these are services which offer television, landline, broadband and mobile as an all-inclusive deal from a single provider.
TalkTalk and Virgin both have their own quad-play offerings, but Sky’s entry could prove disruptive as 40% of its users currently pay for TV, Internet and a phone line as a complete bundle – a figure that’s higher than its rivals enjoy.
So how do consumers benefit? Aside from the promise of more competitive quad-play packages and cheaper deals, a single provider also means a simplified bill each month – isn’t it preferable to have just one bill for everything than four different accounts for each service?
Prices should fall
Across Europe, quad-play has proved especially popular, and in general prices have fallen. Unfortunately, this often translates into lower revenue per user for all the service providers, but it’s either that or lose customers as they migrate to competitors.
Industry commentators have expressed concern that with only three networks in the UK (after the Three and O2 merger is completed), prices could rise, but Sky’s announcement have allayed those fears in the past week.
Quad-play in theory means that consumers prices will eventually fall, and with Dixons also announcing its own MVNO, consumers looking for a bargain should be in a stronger position in the very near future.
Vodafone – out in the cold?
Sky’s deal with O2 makes Vodafone look increasingly vulnerable, as the UK telecoms market consolidates and quad-play becomes viable. Sky already had a mobile trial with Vodafone for a select group of users, but with EE/BT merging and Three/O2 also joining forces, Vodafone desperately needs to fight back.
Rumours have been circulating that Vodafone plans to acquire TalkTalk to establish a viable quad play offering – whatever happens, the company faces an ugly battle as more tech companies launch their own virtual networks.
Last week, Vodafone Group CEO Vittorio Colao confirmed they would respond by launching a cloud-based TV service in the UK, and that they would “respond aggressively in the fixed-line business to any discounting by rivals in mobile.”
Colao also said that “the whole convergence bundling game” would result in higher take-up, but that he expects it could also lead to price wars and declining ARPU.
How the rest of the year pans out is anyone’s guess, but for UK consumers it looks like we’ll soon have greater choice, simplified bills, and hopefully lower prices.