Optus-Amaysim merger would lead to MVNO decline: Venture Insights

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Optus-Amaysim merger would lead to MVNO decline: Venture Insights

Market share could decline to 6 percent in a few years.

Optus’ recent acquisition of fellow telco Amaysim is a sign of the future decline of mobile virtual network operators (MVNOs) in Australia, according to research from Venture Insights.

The telco and media research and consultancy firm said the market share of MVNOs in Australia is expected to decline from today’s 15 percent share down to 6 percent in June 2023.

Venture head of research David Kennedy said the deal is a “game changer”. “With the ACCC reported not to oppose the acquisition, Optus will absorb about a third of existing MVNO customers,” he said.

Kennedy also cited Optus and TPG following Telstra’s lead in establishing their own budget brands, with GoMo and Felix both recently launched to compete with Telstra Belong.

“The mobile network operators (MNOs) are grabbing the industry steering wheel off the MVNOs and are setting themselves up to dominate the low-price end of the market,” Kennedy said.

In Venture’s 2020 Australian consumer telco survey, 37 percent of respondents said they planned to switch to an MVNO or a sub-brand of the major telcos due to economic anxieties brought by COVID-19.

MVNOs particularly saw a boost in FY2020, with the ACCC’s Internet Activity Report showing that subscriptions have grown 12 percent for prepaid and 16 percent for postpaid segments.

“The demand for low-price mobile options is the key motivation for TPG and Optus to launch their new sub-brands. Even though there is a risk of cannibalising their own base, they cannot surrender much more of their retail subscriber base to MVNOs,” Kennedy said.

“While the MNOs may lose some revenue, they can maintain margins if the proposed lean business model of these sub-brands delivers lower costs.”

“We had previously forecast rising MVNO market share. However, we now forecast a decline in MVNO market share to 6 percent by June 2023. This is partly due to the removal of Amaysim from the MVNO column, but also stronger competition from MNO sub-brands.”

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