Thanks for the in depth analysis, interesting to see a company with such a wide mix of businesses. Is the pivot towards MVNO also to capture potentially lucrative software and services revenue that can come from that business? The general sense I get is that the profits device trading alone is getting tougher, divesifying into other more lucrative revenue streams (insurance, internet services, etc) is a natural move.
Hi Sheng, I think the primary MVNO motivation would be to put the mobile business back on track to a 5% PBT margin target by establishing greater control / certainty over the cashflows. However, it's not clear to me that there's enough space in that market (zero growth, intense competition). My feeling, on the basis of the write down and management language, is that they're dotting the i's and crossing the t's on investment hypotheses - there's still risk in an MVNO business and there's plenty of opportunity to invest in their core retail business, particularly exploring circularity across product categories with the new MusicMagpie capability.
The BNPL operator Klarna is also adding a MVNO business to their portfolio close to their IPO. It seems very lucrative to have safe recurring revenue on a very commodotized service (internet data) but agree with you it is a very crowded space and not that easy to gain traction.
Thanks for the in depth analysis, interesting to see a company with such a wide mix of businesses. Is the pivot towards MVNO also to capture potentially lucrative software and services revenue that can come from that business? The general sense I get is that the profits device trading alone is getting tougher, divesifying into other more lucrative revenue streams (insurance, internet services, etc) is a natural move.
Hi Sheng, I think the primary MVNO motivation would be to put the mobile business back on track to a 5% PBT margin target by establishing greater control / certainty over the cashflows. However, it's not clear to me that there's enough space in that market (zero growth, intense competition). My feeling, on the basis of the write down and management language, is that they're dotting the i's and crossing the t's on investment hypotheses - there's still risk in an MVNO business and there's plenty of opportunity to invest in their core retail business, particularly exploring circularity across product categories with the new MusicMagpie capability.
The BNPL operator Klarna is also adding a MVNO business to their portfolio close to their IPO. It seems very lucrative to have safe recurring revenue on a very commodotized service (internet data) but agree with you it is a very crowded space and not that easy to gain traction.