Optus to acquire Amaysim, signals decline of MVNO market

Optus’s impending acquisition of Amaysim could signal the decline of Australia’s mobile virtual network operator (MVNO) market, according to market research firm Venture Insights.

Last week, Optus said it would acquire the shares of Amaysim, Australia’s largest MVNO, and its customer base of nearly 1.2 million subscribers for A$250m, in a bid to disrupt and reinforce its presence in the market.

As an MVNO, Amaysim already uses Optus’s mobile network infrastructure to deliver its services. Optus said it will keep the Amaysim brand intact and that the deal will provide the certainty and backing needed to power ahead and accelerate its growth in the MVNO segment.

David Kennedy, head of research at Venture Insights, said the acquisition was a game changer and that mobile network operators (MNOs) were “grabbing the industry steering wheel off the MVNOs and are setting themselves up to dominate the low-price end of the market”.

Some MNOs, including TPG and Optus, have launched their own low-price brands to meet the demand for cheaper mobile services. A Venture Insights survey found that 37% of people who were planning to switch mobile phone services were looking to change to an MVNO or MNO sub-brand.

“The demand for low-price mobile options is the key motivation for TPG and Optus to launch their new sub-brands,” said Kennedy. “Even though there is a risk of cannibalising their own base, they cannot surrender much more of their retail subscriber base to MVNOs. While the MNOs may lose some revenue, they can maintain margins if the proposed lean business model of these sub-brands delivers lower cost.

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

Although the wholesale MVNO market may decrease, Venture Insights said the increased competition in the overall MVNO and sub-brand space will still benefit consumers. In an early response, the Australian Competition and Consumer Commission (ACCC) has said it does not plan to conduct a public review of Optus’s acquisition of Amaysim.

The Covid-19 pandemic has provided a boost to MVNOs this year, with the ACCC’s latest internet activity report noting that the number of MVNO subscribers for pre-paid and post-paid segments has grown by 12% and 16%, respectively.

The analyst firm said 5G is also a growing focus for MVNOs as they look to avoid customer churn, but the potential growth of MVNOs is likely to be subdued because of the 5G premium that price-conscious customers will have to pay.