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April 14, 2016updated 12 Jul 2017 9:14am

As Tesco Mobile hits 4.6m customers, how is the supermarket achieving such strong growth in the UK MVNO market?

Analysis: Tesco Mobile has longevity and scale that most MVNOs can only dream of.

By Alexander Sword

Tesco’s financial results saw some of its fundamentals returning to positives, with underlying annual profit growth and quarterly sales growth.

They also saw continued growth at Tesco Mobile, reaching 4.6 million subscribers in an impressive 5 percent year-on-year expansion.

Launched in 2003, the mobile virtual network operators (MVNO) has now won the title of Which? recommended provider five years in a row.

In a competitive market, Tesco Mobile has achieved longevity and scale that other providers have only been able to dream of.

The positive signs at Tesco Mobile contrast markedly with the fate of the relatively short-lived Mobile by Sainsbury’s MVNO.

The virtual network, run on infrastructure from Vodafone, ran from July 2013 to January 2016, attracting around 150,000 customers.

Mobile virtual network operators (MVNOs), of which Tesco Mobile is the largest, have been a key part of the UK’s mobile infrastructure, helping to keep costs relatively low for consumers.

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Other major players include the second largest, Virgin Mobile, and iD, Carphone Warehouse’s partnership with Three.

Tesco Mobile has all of the advantages of being connected with a big retailer: as it offers a large range of services such as banking, Tesco has been able to cross-sell its services to customers.

More specifically, though, Kester Mann, Principal Analyst at CCS Insight, highlights 4G as an area which Tesco Mobile has been “aggressive” on.

He notes that it moved to offering 4G quite early, which has helped to boost uptake. This compares with closest rival Virgin Mobile, which still has yet to roll out 4G to customers.

Tesco Mobile has also traditionally performed very well on customer service.

Ofcom’s most recent quarterly telco complaints report, encompassing EE, O2, Talk Mobile, Tesco Mobile, Three UK, Virgin Mobile and Vodafone, revealed that compared to other providers, Tesco Mobile continued to receive the lowest relative volume of complaints.

Mann also highlights Tesco’s “wide footprint and strong brand” as key drivers, also saying that Sainsbury‘s efforts in the MVNO space may have been hampered by developments at Vodafone.

Tesco may find itself under more pressure in terms of price, however, with BT Mobile and the People’s Operator coming to market with very low-cost offerings.

As for the future, Tesco Mobile could be looking at a fundamental shift in the way it operates before too long. According to a report in the Telegraph in March, it is mulling buying O2 out of their joint venture.

The FT reports that Three owner Hutchinson Whampoa, which is hoping to purchase O2 from Telefonica has included this possibility in their proposals, giving Tesco capacity on the network.

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