If there was ever a market that turned supply and demand theory on its head, it's mobile phones, and our seemingly endless capacity to spend more on mobile services and handsets despite drastic commoditisation. By 2005, the Australian market was just passing saturation point as penetration sailed through the 100 per cent mark, but demand remained strong. People with one mobile phone bought a second or in some cases a third handset, and it's now not at all unusual for people to carry multiple SIM cards, so they can flip them in and out of their phones to take advantage of different rates and plans.
"The continued growth in mobile subscribers can be attributed to both a rapid increase in mobile broadband uptake, as well as users with multiple active devices," says IDC analyst Mark Novosel. "A business user might have a mobile device as well as a Blackberry or a consumer [may have] a post-paid and prepaid account."
By the end of this year, mobile phone penetration in Australia will exceed 113 per cent, and won't stop there. This is largely because we are increasingly buying 3G phones and using them to connect to the internet.
Growth in this sector is being further enhanced by the rise of the mobile virtual network operator (MVNO), effectively a mobile network reseller that has a niche audience and a specialised offering.
Woolworths' recent entry into the market for mobile phone connectivity, with a simple, affordable call and text offering, indicates that at least one very large and experienced retailer believes there is room for growth through offering a simple plan tailored to its existing customers.
Although it is not releasing any numbers, a spokesperson for the retail giant says that the Everyday Mobile prepaid mobile phone offering, launched on August 3, is selling in line with expectations throughout the country.
"We already sold more than 21 million recharge transactions each year through Woolworths stores, so we have a good idea of what the average Woolworths customer was after, and designed the product around this and other market research," the spokesperson says.
Coles was also rumoured to be seeking to become a MVNO in 2007, however, the plan was apparently put on hold when the retailer was bought by Wesfarmers in mid 2007, allowing Woolworths the opportunity to be first to market.
International comparisons suggest the Woolworths deal may simply be the first in a series of MVNO announcements, as network operators seek to diversify their customer base.
"The MVNO relationship basically enables mobile network operators to expand their customer base by appointing network resellers with specific niche markets," says a senior consultant with customer relationship specialists The Fuel Agency, Brant Olson.
"From the network operators' point of view it's about expanding their customer base through distribution channels with a much lower cost of acquisition."
IDC states MVNO relationships account for about 3 per cent of revenue and 4 per cent of subscribers in the Australian market, while throughout the Asia-Pacific region MVNOs account for anywhere from 13 per cent to 17 per cent of the market.
And MVNO deals are not limited to mass retailers. Around the world, vehicle manufacturers, music channels, post offices and banks have all tried reselling mobile phone connectivity, each offering slightly different service plans.
"Once the mobile phone market reached saturation, MVNOs are a way to increase spend per user, because the MVNOs offer a more tailored service," Olson says.
"If you're looking to grow in a specific application space or demographic then it makes sense to work with a specialised partner who can tailor the content and services to that demographic."
Although Telstra has steered away from the MVNO space, Optus began reselling mobile connectivity through the mobile services retailer First Direct in 1996, and is the mobile connectivity wholesaler behind the Woolworths offering.
"With the Woolworths deal we're providing additional support services as well as the online sales platform, so the whole deal is very straightforward for Woolworths," says the managing director of Optus Wholesale and Satellite, Vicki Brady.
"They didn't need any additional software or network management tools. This kind of relationship will enable us to get access to parts of the market which have traditionally been a challenge for us to reach."
Vodafone Hutchison Australia also plans to increase its MVNO partners, and is assessing a number of niche and mass marketing partnerships.
VHA already boasts a handful of MVNO relationships, as well as a significant reseller deal with AAPT, which resells the Vodafone network to its customers and to other MVNO operators.
"We expect our business through MVNOs to grow faster than the rest of the business in coming years, both in terms of number of customers and revenue per customer," says VHA director of Strategy and Business Planning, Zac Summers.
"There are brands out there that are just better at making sure we have products that customers want to buy."
The renewed focus on the MVNO sector will also open up more opportunities for mobile virtual network enablers - companies such as M2 Telecommunications, which buys network connectivity off Optus, and resells it to smaller MVNOs.
"We have about 30 smaller operators, from internet service providers such as TPG, which resells our mobile service bundle with their internet offerings, through to one company that sells purely to international students, offering them cheaper international calls," says M2 Telecommunications managing director Vaughan Bowen.
"To be effective, an MVNO needs to create a niche offering which will appeal to at least 5000 customers, but they could be anyone from a university student union through to a football club, anyone with access to a market."
But it's not just the human race that's going to be contributing to the rise and rise of mobile communications, says Novosel.
The next phase of the internet is already being referred to as the "Internet of Things", and will feature inanimate objects, such as fridges and parking meters, not only getting their own internet protocol addresses, but also their own SIM cards, in order to connect wirelessly to the internet.
Following this trend, the next generation of MVNOs may well be technology integrators, seeking to use mobile internet to enhance the functionality or remote operating capacity of all manner of devices.
"Telemetry, as well as backup data links and other machinery such as parking meters, wireless EFTPOS terminals and electricity smart meters may further contribute to a rising mobile subscriber penetration," Novosel says.
"Although we are well beyond the saturation point for handsets, there is still a very long way to go in terms of active SIM cards in operation."
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