Data-only on the mobile market: a real form of competition?

Friday 12 December 2014 | 11:46 CET | Background

The arrival of a new operator is by definition an interesting development, such as the launch of Free Mobile in France in 2012. How do the established players react? Can the newcomer take market share quick enough? With the arrival of a new category of players, the data-only providers, another question emerges: does this kind of newcomer constitute full competition, even if they don't offer traditional voice and SMS services?

A number of new mobile operators are preparing to launch in Europe. They are using LTE, the newest and most spectrum-efficient technology, and are not hindered by any legacy operations (2G or 3G). The most important newcomers are:

  • Slovakia: Swan. The company launched 09 December in the city Trnava, with a nomadic service (fixed wireless). Swan targets 20 percent population coverage by the end of 2014, after which it will rely on roaming with other operators to provide a full mobile service.
  • Finland: Ukko Mobile. Launched 02 December with a LTE-450 network built by Huawei with immediate national coverage. Ukko is targeting initially the business market and will later expand to rural households (an estimated 700,000 summer homes).
  • Norway: Ice. This provider (part of AINMT, controlled by investor Len Blavatnik, also owner of Warner Music) acquired a 4G licence at the expense of Tele2, which was subsequently forced to exit the Norwegian market. Ice already provides CDMA services and will switch to LTE-450 in cooperation with Alcatel-Lucent in order to offer mobile broadband services.
  • Sweden, Denmark: Net 1. These providers also belong to AINMT.

Other newcomers this year include PrimeTel (Cyprus), which was already active as a MVNO, and Digi (Hungary), which started first on the TV market, and possibly Midas in Poland.

The arrival of newcomers is interesting for two reasons:

  • Can the newcomer shake up the market, as we've seen in France? How do the established players react? Does a price war ensue?
  • If the operator chooses a data-only business model, can this be considered competition for the incumbents? Or in other words, are services such as Skype/Skype Out and Viber/Viber Out substitutes for mobile voice? And can services such as WhatsApp, Facebook Messenger and Kik completely replace SMS?

That last question is especially relevant in Norway at the moment. Tele2 was unable to acquire a licence in the the December 2013 auction and in July 2014 decided to sell its activities in Norway to TeliaSonera. However, the Norwegian regulator has now decided that reducing the market from three to two operators could have a negative impact on competition. The companies have until 22 December to propose remedies, and the regulator is expected to take a decision by 15 January.

Ice's arrival means the market is not necessarily reducing to two players, but going from four to three operators. Ice has said that in addition to the 450 MHz band, it aims to use eventually the 800, 900 and 1800 MHz bands and offer voice over LTE. If the regulator doesn't consider this solid enough, the crucial question emerges whether over-the-top services such as Skype and WhatsApp can be considered legitimate substitutes for traditional voice and SMS. 

TeliaSonera and Tele2 are likely to propose concessions to help Ice, so the newcomer can establish a position. The decision and reasoning from the Norwegian regulator will be keenly awaited. 

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