Analysts are divided on how the market will react to the latest virtual operator to throw its hat into the fray. Yet, they note it has brought a dose of reality to what is a highly competitive segment.
The latest virtual mobile network operator (MVNO), me&you, launched officially yesterday after running a teaser campaign under the hashtag #beunordinary. It aims to offer consumers "freedom from frustration", according to CEO Brett Howell.
Me&you has hit the market with a SIM-only offering, simplified pricing, no contract locks-ins, and the option to purchase or finance a handset through a third-party – all issues that have long been bugbears for end-users. Yet, analysts are unconvinced this will be enough for the new kid on the block to be able to make a go of it, despite its realistic target of between 15 000 and 20 000 subscribers in year one.
However, analysts have been sceptical about MVNOs succeeding as anything other than niche plays since Virgin Mobile failed to deliver on its ambitious promises, made at its launch eight years ago. That operator has since seemingly faded into obscurity and analysts have been cynical about its prospects.
Brian Neilson, director at BMI-TechKnowledge, says me&you's business model is appealing, but achieving massive scale will depend on execution. He notes there are alternative offerings, and building a strong brand will be key, and this does not come cheaply.
However, ICT commentator Adrian Schofield says the new virtual operator is unlikely to shake-up the market because its own target shows "this will only be a ripple on the surface of the market and not a tsunami".
Africa Analysis MD Dobek Pater notes MVNOs will continue to expand in SA, but will remain niche players for now. He adds the new operator is not expecting to take the market by storm. "At these subscriber base levels, it does not present a threat to the larger operators over the short- to medium-term. However, it may begin to redefine the market over time by introducing new offerings."
Ovum analyst Richard Hurst adds the new operator, which is likely to be "just another player", is not going to threaten the incumbents, but is offering realistic targets and clear-cut pricing, which will differentiate the company and give it a chance of success. "I don't see them upsetting the apple cart, but they're being clever in their approach."
Among the ways me&you is trying to stand out from the crowd is by offering SIM-only deals, with no contracts, and the option of financing or buying a handset through a third-party. The online-only operator's pricing is also meant to be simple to understand.
Me&you's "value bundles" are priced according to payment commitments. If end-users spend R100 a month, they pay 69c a minute, while R500 gets calls at 39c a minute – across all networks at any time. Data, MMS and SMS rates are the same across packages, being 60c per SMS, 70c per MMS and 99c per MB. In addition, special launch offers are available.
Neilson says this pricing will set the operator apart, especially at the 39c a minute level. BMI-T's calculations show an average effective price for out-of-bundle calls across all networks comes in at 76c a minute. Vodacom's effective price per minute is 69c, while Cell C's cheapest offering is 66c a minute, and MTN's is 79c.
The transparency in pricing will also aid the operator, comments Neilson. Hurst notes me&you could well woo consumers who have been battling to understand their bills. However, Schofield says he doubts this will be a win for the operator because of the difficulty in establishing a like-for-like comparison of mobile pricing.
Pater adds pricing may be attractive on some products, but not all, and depends on actual consumption. Hurst says, however, me&you has put some fairly competitive offerings on the table, which could cause the incumbents to relook their pricing if it becomes a threat.
When it comes to the lack of contracts, Neilson says there will be some who appreciate this offer, and others who want a traditional contract. Schofield adds SIM-only offerings are already available, and could spur the incumbents to push these more aggressively, while Pater feels decoupling handsets for deals will only attract a specific audience.