Raymond Yu
3UK and Gamma Telecom - it's a start
Last week 3UK announced its wholesale deal with Gamma Telecom. The deal allows Gamma Telecom to become an MVNO and will enable it to offer its own-branded mobile services. Comment: This is 3UK's first MVNO deal. Assuming there are no issues from Gamma Telecom over the next few months, this deal should encourage other potential MVNOs to consider 3UK as a reliable host provider. It should be no surprise that this news follows its recent RAN sharing deal with T-Mobile (see EuroView Daily, 18 December , 2007), which would have improved 3UK's 3G coverage and so enhanced its attractiveness to MVNOs. This deal between Gamma Telecom and 3UK is also complementary. 3UK has always been consumer focused and Gamma Telecom targets the SME market, a segment in which 3UK is not strong, although it has recently been pushing its mobile data offerings to the business segment. However, from Gamma's perspective the UK market is a difficult one. In January 2007, the UK market has 17 MVNOs, including Gamma Telecom. The majority of these are very small players, the largest being Virgin Mobile and Tesco. We feel there are potentially better markets for new entrants to enter than the UK. However, being an MVNO is all about finding and targeting the right niche, and there may still be segments that have potential. Gamma will hope that SMEs is one of them and teaming up with a mobile data-centric player such as 3 makes a lot of sense. From 3UK's perspective it now has the opportunity to win further wholesale deals. However, it will have to compete with Vodafone and T-Mobile, the main players in the UK wholesale market. Clearly winning MVNO deals is now a top priority for Vodafone. It has been particularly active recently, signing a deal with Talkmobile, Carphone Warehouse's new postpaid MVNO, and Lebara in October 2007. Therefore, as a late entrant to the UK mobile wholesale market, we expect 3UK to struggle to compete with its peers, especially for large scale deals.
