Virgin Media enters the 5G fight with Vodafone MVNO switch

Virgin Media has announced it will move its MVNO wholesale agreement from BT Enterprise to Vodafone, as the 5G engines start to rev.

Although the agreement with BT Enterprise does not expire until 2021, Virgin Media has said it will launch 5G services on Vodafone’s network ahead of this time. Virgin Media Business has also signed a wholesale agreement with Vodafone relating to the supply of various network services.

“This agreement with Vodafone will bring a host of fantastic benefits and experiences to our customers, including 5G services in the near future,” said Lutz Schüler, Virgin Media CEO.

“Twenty years ago, Virgin Mobile became the world’s first virtual operator and this new agreement builds on that heritage. It will open up a whole new world of opportunity for Virgin Media as we focus on becoming the most recommended brand for customers and bring our mobile and broadband connectivity closer together in one package for one price.”

While customer bundling has always been a prominent strategy for the Virgin Media business to increase customer loyalty, the mobile side has never genuinely attracted much interest in a UK market where MVNOs have traditionally played second fiddle. Pricing and bundling options have not been revealed as of yet, though with a prominent broadband business sitting alongside a refreshed content proposition, perhaps the Vodafone network might be the missing piece of the puzzle for mobile.

“We are delighted that Virgin has recognised the huge investments we’ve made, and continue to make, in building the UK’s best mobile network and our role in challenging the market with new commercial services,” said Nick Jeffery, Vodafone UK CEO. “As a result, they have chosen us to work with them in the next phase of their development.”

As it stands, Virgin Media currently has 5.6 million broadband subscribers, a 21% market share of the UK’s 26.6 million broadband connections. Project Lightning, Virgin Media’s fibre expansion initiative, will eventually pass 17 million residences, while ARPU for the broadband services has increased 0.5% to £45.39 for H1 2019. Prices are also set to rise by 4.9% on average for the remainder of the year to further grow ARPU.

Alongside the progress being made in broadband, the team has also refreshed its TV proposition. This was a pale imitation of content in bygone years, though partnerships with Sky, BT and Amazon Prime for football content could lead the TV services into the land of relevance.

This is a very healthy position to be in, however the share of mobile is much less attractive when you take into consideration how long the brand has been around. With 3.1 million mobile customers, Virgin Media’s MVNO only commands market share of 3.6%. This is the missing piece of the puzzle.

Mobile certainly presents an opportunity for Virgin Media to drive revenues forward, though the 5G world is becoming increasing congested. Alongside the four MNOs, Sky also plans to launch 5G services and we suspect there will be more in the pipeline. In a market with just over 84 million subscriptions to fight for, there will be a lot of choice.

Being a MVNO is not necessarily a perfect situation, though Virgin Media is in a good position. The convergence trend, bundling together services into a single bill, is a proven strategy to decrease customer churn and increase both ARPU and NPS. It might not have taken hold in the UK just yet, though there is plenty of evidence for the sceptics to mull over on the continent.