This week, Ireland got a new ‘virtual’ operator that aggressively challenges the status quo on price and data provisions. GoMo, owned by Eir but operated separately, is offering a massive 80GB of monthly data, along with all calls and texts for €10 per month.
The only catch is that it’s all online; no stores, no subsidised handsets, bare-bones customer service. You sign up, get a Sim card and don’t bother them.
Eir may be right to choose a high-data, rock-bottom pricing strategy. Carving out space for a new mobile operator in Ireland is very difficult.
It requires a very big marketing budget, a large, enthusiastic retail network and a willingness to take losses for years.
Three spent almost €2bn over eight years getting to profitability in the Irish market. Last year, Dixons Carphone was forced to put its iD Mobile operator into liquidation after a miserable two years spent failing to garner 1pc of the Irish market, despite a substantial nationwide retail network and cheap tariffs.
There are six ‘virtual’ operators that use one or other of the three main networks. The biggest, by far, is Tesco Mobile, with 8pc of the market. The next biggest is Virgin Mobile (2pc). Then come LycaMobile, Post Mobile and 48, all of which are around 1pc. Of these five, only Post Mobile uses Vodafone’s network: all of the others piggyback on Three’s network.
As of this week, GoMo (using Eir’s network) joins this pack, hoping to race to 100,000 subscribers – about 2pc of the market – quickly.
What does Eir’s GoMo move tell us about how the Irish telecoms market is moving? Is this the biggest development we’re likely to see in the coming months? Or do some other big telcos have a few surprises up their sleeves?
There are only really four main telecom networks in Ireland: Vodafone, Three, Virgin and Eir. These are the only ones that build, maintain and sell their own national physical networks, including masts, antennae and other infrastructure both to the public and to businesses.
Here’s a look at the strengths and weaknesses of all four and what to look out for in the near future.
1. Eir
Revenue: €1.25bn
Market share fixed: 40.7pc
Market share mobile: 19.4pc
Of all the Irish networks, Eir has undergone the most radical change, both in its ambition and its culture. The old former State incumbent that plodded along on infrastructure investment for decades is now a much faster-moving, more aggressive company. Within months of taking over last year, new owner Xavier Niel ditched chunks of the business processes (including some long-serving executives) and announced a massive overhaul in the company’s creaking copper and mobile phone networks that will probably cost over €1bn.
Instead of focusing efforts on regulatory complaints, Eir executives are getting on with business. Part of this is a candid admission that large parts of the company’s mobile and landline services are mediocre and set for a massive upgrade.
This means a total network overhaul, replacing copper with fibre – to the home, not just distant exchanges or cabinets – and a huge reset of its nationwide mobile network.
Many of the new services being offered are based as much on Eir’s IT revamp as a cultural one. Its new GoMo offering, for example, is only possible because of a new online billing setup. Similarly, its new TV service is likely to lean heavily on parent company FreeBox IPTV’s technology that it pioneered in France.
Owner Mr Niel is gradually rolling out services that he’s tried elsewhere.
The new mobile service, GoMo, is a very aggressive move for mobile data and pricing – no one else in the market comes close to its offering.
Eir has also retained a cheeky, bold strategic side. Chief executive Carolan Lennon’s intervention in the National Broadband Plan debate, telling TDs that Eir was willing to swoop in and do a less expensive job with half the proposed public subsidy, had a discernible impact on the controversy, giving ammunition to critics of the plan and positioning Eir as both a fallback option and a willing future State partner.
Keep an eye on: urban fibre broadband rollout, new TV service and more aggressive head-to-head competition against rivals
2. Virgin
Revenue: €450m
Market share fixed: 16.7pc
Market share mobile: 2pc
Virgin has been sitting atop the urban broadband pile for almost a decade. In that time, no one has been able to compete on speed or quality because its cable broadband has been far faster and more reliable than other companies relying on Eir’s copper phone network.
But things are changing rapidly for the company and it has had to introduce new services and consider unprecedented expansion plans to deal with competitive threats coming down the line.
Virgin’s biggest threat, by some way, is Eir. As noted above, the former incumbent has pulled the trigger on a massive upgrade plan for its urban networks, switching out copper for new fibre. When completed, this obliterates Virgin’s broadband speed and quality advantage.
It looks like the company may respond in one of two ways. It may consider expanding beyond the core urban areas where it has confined itself for two decades. And its parent company, Liberty Global, may consider a strategic merger with Vodafone, as it has done in Germany, or a Vodafone-related entity such as Siro.
Earlier this year, Virgin Media executives predicted that the company would grow its network reach by between 20,000 and 30,000 this year, following construction of new builds. This would bring its overall fixed line reach to 950,000. But this may not be enough to combat the fibre-based pincer movement happening between Eir and Siro, the joint venture between Vodafone and the ESB.
However, there have been persistent rumours that Virgin Media has been discussing the possibility of tie-ups with local rivals, either selling its own services on other Irish networks or even allowing rivals to sell their services on its network.
Other than its acquisition of TV3, the company’s main growth in recent years has been in mobile, where it has almost 100,000 Irish customers for its ‘virtual’ mobile service, operating on Three’s network.
It has, however, had a tough time in TV. The most recent figures show that it has 269,000 TV subscribers, roughly half of what it had at the start of the decade. Arch rival Sky has maintained its TV subscription numbers and is now more than twice Virgin’s number.
Keep an eye on: Potential major network deals with rival operators
3. Vodafone
Revenue: €241m
Market share fixed: 13.3pc
Market share mobile: 36pc
Vodafone has been trying to add new parts to its business in a piecemeal fashion, doing better in some segments than others.
Outside its core mobile network, its biggest recent investment has been its half share in Siro, the fibre network being built around the country with the ESB. Progress on this network has been steady, but substantially behind schedule. Just half of the 500,000 premises that Siro expected to ‘pass’ (make available for a connection) by this point have made it.
This may have been a strong contributor factor in Vodafone and the ESB, having pledged €225m each to the project, going to borrow money to support the Siro network earlier this year. To be fair, they are not alone in refinancing their operation – Eir also went back to the markets for investment money earlier this year.
Vodafone’s main strength remains its mobile network, which is consistently ranked as the strongest in the country in terms of signal quality and speed. This is down to a decade of investment in physical network building and upgrades.
It has been unimpeded by dragging factors such as the integration of an underpar network (the old O2 network subsumed by Three) or rival corporate priorities, such as Eir’s previous focus on buyouts and financial rescue.
An additional aid to controlling output may be that it only has one tiny ‘virtual’ operator (Post Mobile) piggybacking on its network.
Because of this, Vodafone has retained its position as the biggest operator in the country, especially with post-paid high-spending customers such as business users.
This is despite Vodafone generally charging more than rivals for access to its network, particularly in relation to data.
At present, it is the only operator to offer 5G services in Ireland, even though this is only in a handful of streets in five Irish cities.
It has adopted something very different to a premium strategy for its home broadband and telephone services, offering customers slightly cheaper deals than main rivals because it is piggybacking on Eir’s copper network. As a result, it has remained steady at number three in the home services market, behind Eir and Virgin, although this is a lower-margin business for the company.
While some of its energy has gone into repositioning its mobile network for new business functions, such as the internet of things, the network’s fledgling TV business could be described as struggling. It lags far behind closest rival Eir and light years behind either Virgin or Sky.
Keep an eye on: How it develops its 5G network; also, lingering merger rumours with Virgin
4. Three
Revenue: €591m
Market share fixed: n/a
Market share mobile: 32.5pc
Three hasn’t invested in different platforms in the same way as its major rivals Eir, Vodafone and Virgin.
Instead, it spent all of its money on buying O2 Ireland for up to €850m five years ago. Since then, it has been occupied with the huge, expensive task of merging that old, creaking O2 mobile network into its own more modern one. In telecoms terms, this is a little bit like West Germany subsuming East Germany. It was always going to take time, money and involve some pain along the way.
The O2 acquisition put the company into second place in Ireland and gave it a much-needed chunk of bill-paying customers, especially in older, less churnable demographics. The company has sweated its network assets more than any rivals. It hosts four of the six ‘virtual’ operators on its network, including the independent powerhouse Tesco Mobile.
Three’s biggest challenge is the absence of any substantial fixed-line infrastructure, the only Irish operator in this position. It is generally more reliant on other companies’ backhaul services to support its wireless operations, potentially sucking some extra margin away.
It has recently begun to aggressively offer wireless broadband alternatives to fixed line services, betting that the continued absence of high-quality fibre in most of the country gives it a window to build up a home telecoms service business which it can augment when it rolls out its 5G network.
However, it risks being late to the party on 5G. Earlier this month, company executives told this newspaper that it had not yet finalised a 5G contract with an equipment supplier.
This is despite its main rival, Vodafone, having already launched its first 5G sites in cities around the country. Three’s pledge to have a 5G network launched by the end of 2019 now looks questionable, although it may yet do so if it can accelerate its plans.
Keep an eye on: 5G plans
OTHER NOTABLE PLAYERS TO WATCH
1. Sky
Sky has come from nowhere to take a 13.4pc share of home broadband subscriptions in Ireland, using Eir’s network.
It also has a commanding lead in TV subscriptions, based on its premium sport, movies and HBO content. Its biggest challenge may come soon from online services such as Disney Plus and Apple, as well as more suitors for top-drawer sports competitions such as Premier League football.
2. BT Ireland
BT Ireland has been up for sale for some time with talks between its parent company and British equity firm Mayfair reportedly having taken place in early autumn.
The business has focused on selling to other businesses rather than at retail level. However, it has maintained a substantial public brand sponsoring the annual Young Scientist competition each January.
3. Imagine Communications
Imagine is currently in building mode again after years fighting a legal case with Motorola over the ill-fated Wimax wireless broadband network. Its new wireless network rollout focuses on townships and rural areas, with CEO Sean Bolger saying that much of its network could overlap with the State-backed National Broadband Plan intervention area.
While the company has denied challenging the Government over the NBP intervention area, its future legal response to an NBP rollout in rural areas it believes it is covering will be worth watching.
Source: Read Full Article