Base sale to Telenet forces Mobistar into challenger role

Monday 20 April 2015 | 15:39 CET | Market Commentary

Telenet's proposed acquisition of Base will result in considerable changes to the mobile market in Belgium, especially for Mobistar. Telenet is currently an important wholesale customer at Mobistar. Not only will the deal see Mobistar lose the biggest MVNO on its network, it will also be relegated to third place on the Belgian market. Based on figures from the end of 2014, Base-Telenet would become number two on the Belgian market with 32 percent of mobile customers, while Mobistar falls to third place with 29 percent. The new situation raises a number of questions for the Belgian market: how will wholesale access to mobile as well as fixed networks be arranged? And how can Mobistar as the smallest player compete against the two larger integrated operators?

Belgian mobile market shares before and after Base-Telenet merger

Mobistar stopped offering fixed services in 2013, claiming it was no longer economically viable. It would still like to be able to offer fixed services, but has not been able to arrange a satisfactory deal for wholesale access, even after courts in Belgium last year upheld regulated access to cable networks. Mobistar said in January this year that it still plans to launch a TV service on the Telenet network, but will wait until regulator BIPT completes its review of wholesale tariffs this summer, with the hope these will be lower. The pending merger of Base and Telenet may slow this process further and complicate attempts at securing an advantageous network deal.

Base also recently stopped offering fixed services (via the Proximus network). However, it appears certain that Telenet will focus after the acquisition on a quad-play offer. Proximus has done well already with its quad-play, adding new customers every quarter for the last eight quarters. The problem for Telenet is that its fixed network only covers Flanders. A way to solve this would be for Liberty Global, Telenet's parent company, to also buy the Wallonia and Brussels cable operators Voo and Numericable. Then Telenet would be able compete fully with Proximus. Mobistar will need to push the regulator to ensure low enough wholesale prices for access to the fixed network, so it can compete against Proximus and Base-Telenet and secure a deal with at least one of them for access. 

The Belgian mobile market showed small signs of improvement at the end of 2014, with the drop in revenues and customer numbers slowing. Mobistar grew its own postpaid base in the past two quarters, but for the six previous quarters its only growth came from the strong increase in Telenet's mobile customer base. Telenet extended its MVNO contract with Mobistar in 2012, to run until 2017. Telenet has indicated it will sit out the contract, although it's not clear yet whether it plans to maintain a MVNO brand alongside the Base offering. 

Of the three current mobile operators in Belgium, Base hosts the most MVNOs, and Proximus the least. Telecompaper estimates that as much as half of Base's customers are at MVNOs. While this is an important source of revenue for the company, Telenet's owner Liberty Global is not known to be a big supporter of wholesale. It may not want to see the wholesale customers go, but this could offer a chance for Mobistar to build a new business stream.

Mobistar can be expected to take a greater focus on the wholesale market. It already claims the best 4G coverage in Belgium. It's unlikely to lose more MVNO customers like Numericable, which switched recently to Base, supposedly for access to 4G. Mobistar may take a pro-active approach to Base's MVNOs with new terms to bring them to its 4G network. Given the relatively low penetration of smartphones and take-up of data services in Belgium, there are still opportunities in the market for Mobistar to promote 4G more, both at the retail and wholesale levels. Mobistar could even take Telenet's role in the market and position itself more as a challenger, for example by increasing smartphone subsidies are partnering with OTT service providers such as Spotify and HBO. Mobistar is unlikely to want to start a price war though, given prices are only just starting to stabilise in Belgium after the price war brought by Telenet's entry on the market.

Telenet and Base must still secure regulatory approval, and this may require concessions on their part. To keep the Belgian market competitive and avoid a further strengthening of the Proximus-Telenet duopoly, affordable wholesale access to the fixed market needs to be ensured, as well as continued access to the Base mobile network. If Mobistar is unable to secure access to fixed networks or take some wholesale business from Base, its future looks uncertain. This could make it the next operator in Belgium up for sale, with the same potential bidders for Base - Altice and Iliad - standing in the wings. 

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