NEWS Serial entrepreneur Stelios Haji-Ioannou has revealed the thinking that has gone into the creation of easyMobile, the low-cost mobile phone offering due to launch next month in the UK - but he has given away few details on the venture's pricing and ambitions.
Keynoting on the final morning of the 3GSM mobile conference in Cannes this week, he said: "easyMobile, as an MVNO [mobile virtual network operator], is the world's smallest as it has zero customers at the moment," he said.
But the easyGroup founder, still best known for his easyJet budget airline, opened up on the venture's origins. While not going as far as to confirm the business plan was sketched on the back of a menu at a famous nearby hotel during last year's show, he did admit to visiting Cannes at that time - though not seemingly going as far as paying to get in - and brokering the relationships that take him to the cusp of what should end up a 12-country rollout.
A number of experts have pointed out the similarity between the budget airline business and low-cost MVNOs, which piggy-back on a physical mobile network and ruthlessly target niches, such as the young or those not wanting bells-and-whistle services.
Haji-Ioannou said he had read an article in The Economist in November 2003 making that exact comparison. Then he met Telmore, the model budget MVNO riding high in Denmark at that time and later acquired by that market's incumbent, TDC.
It is no accident that Haji-Ioannou went on to appoint Telmore's charismatic founder, Frank Rasmussen, as the man to lead the easyMobile charge. The two men were put in touch by outspoken mobile consultant John Strand, himself a Dane and big fan of the budget MVNO model, which he told silicon.com "makes sense".
Earlier this week René Obermann, chief executive of T-Mobile, spoke of established operators moving away from subsidising low value customers who mainly want simple voice and SMS tariffs. It is no surprise that T-Mobile will allow easyMobile to use its network in the UK, as it did with arguably the world's most successful MVNO, Virgin Mobile.
Haji-Ioannou would not be drawn on which other operators he might have negotiated with, what proportion of the market he aims to capture or even what his break-even point might be. Analysts point to the experiences of Telmore and Virgin Mobile, suggesting around 10 per cent of a country's mobile population is there to be won.
He did say his model will mean top-ups using credit cards over an easyMobile website after a SIM card is sent to a new user to put in an existing phone.
The model "makes unprofitable, low-spending customers profitable", he added.
He said he believes there are four things that will be crucial if easyMobile is to succeed: the easyGroup brand, the TDC/Telmore experience, Frank Rasmussen and the T-Mobile network.
Not all of the Greek-Cypriot's ventures have been successful - and it is believed he won't actually own any of easyMobile but take a cut of proceeds. Yet for all his openness about not being a mobile industry expert, he is sure of the opportunity.
On reading that article in 2003, he said: "It was hard to ignore telecoms… It is such a growing and important part of our lives."
Haji-Ioannou added that easyMobile will allow roaming and will concentrate on 2G services.
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1. anonymous
EasyMobile will launch in the first half of March with the most competitive cross-net prices in the market – and then drop them further within weeks, according to sources close to the company.
Stelios Haji-Ioannou and Frank Rasmussen’s MVNO will offer a simple flat-rate cross-net tariff expected to debut at 14p so it can claim to be the cheapest in the market. The closest existing offer, from The Carphone Warehouse’s Fresh, was repositioned last year after presentations about the threat from easyMobile, and now offers a cross-net flat-rate of 15p per minute and 5p per text.
EasyMobile will better this and follow up with progressive price cuts towards single-digit rates.
Consultant John Strand, who has worked closely with low-cost MVNO Telmore in Denmark, believes that easyMobile could break even on a customer base as small as 125,000. Its low-cost distribution model could bring its subscriber acquisition costs down to £10-15 – up to £18 less than its nearest rival, Virgin Mobile.
However, easyMobile’s host network, T-Mobile, does not believe that it will be able to turn the UK market upside down. Sales director Simon Ainslie said this week: ‘EasyMobile will bring some new dynamics to the market, but I don’t believe they will have the kind of impact they had in Denmark.’
Ainslie emphasised that T-Mobile would be developing its own prepay business in 2005. ‘Prepay is very much on our agenda this year’, he said.
Virgin Mobile, which reported its fourth-quarter figures this week, expects easyMobile to undercut the market.
Steven Day, director of corporate affairs, said: ‘It is reasonable to assume that there will be a message like “easyMobile costs are cheaper because…”, but there will be a catch. With 3, it’s the minimum £15 charge.’
Day claimed that consumers did not buy on price alone, but on fashion and choice of handset. He added: ‘We are convinced they do not have a network access deal that betters ours. Everyone thinks theirs is significantly more expensive in terms of access costs.’
Stelios Haji-Ioannou told Mobile he had no comment to make at this stage.
How they compare
Most prepay tariffs reward bigger spenders with better rates and offer cheaper on-net calls at the expense of more expensive cross-net connections, reflecting the operator’s own costs.
Fresh
Flat-rate 15p
Text 5p
Tesco
Flat-rate 20p
Text 10p
easyMobile
Flat-rate 14p?
Text 5p?