Virgin Media O2 (VMO2) and Tesco have announced a ten-year extension of their ongoing partnership centered on joint venture Tesco Mobile. Tesco Mobile was formed as a joint venture between the two companies twenty-one years ago, and it has since grown to become the UK's largest mobile virtual network operator (MNVO), with over 5.5 million customers. In 2022, sales rose 9.4% to GBP970 million.
A Symbiotic Partnership
VMO2's press release states that its 4G services cover 99% of the population. The partnership between Tesco and VMO2 embodies a symbiotic relationship with mutual benefits for both parties. For Tesco Mobile, being an MVNO allows it to offer mobile services without the need to invest in building and maintaining its own physical network infrastructure or acquiring spectrum licenses. Instead, Tesco leverages VMO2's established network infrastructure, including towers, equipment, and spectrum, to provide reliable mobile services to its customers. This significantly reduces Tesco Mobile's operational costs and capital expenditures, allowing it to focus on customer acquisition, service innovation, and marketing strategies.
On the other hand, VMO2 benefits from the partnership by gaining additional revenue streams through wholesale agreements with Tesco. By allowing Tesco to utilize its network infrastructure, VMO2 monetizes its excess network capacity, maximizing the return on its network investments. Additionally, partnering with Tesco expands VMO2's market reach, enabling it to tap into new customer segments that may have loyalty to the Tesco brand or seek value-oriented mobile services. This strengthens VMO2's competitive position in the telecommunications market and enhances its overall revenue and profitability.
Network Investments Needed to Meet Elevated Mobile Data Demand
The population share with mobile internet access in the United Kingdom was forecast to continuously increase between 2024 and 2029 by a total of 0.9 percentage points. After the ninth consecutive increasing year, the mobile internet penetration is estimated to reach 94.19 percent (therefore indicating a new peak in 2029). Furthermore, the average data (mobile broadband) usage per UK customer (in 2023) reached 25.1 GB per month (up from 19GB).
“With demand for mobile data greater than ever, we’re continuing to invest heavily in our network to give our customers, and those of other providers who use our connectivity, an even better experience with the fast and reliable mobile services they expect and rely on,” said Lutz Schüler, CEO of VMO2.
“This renewal will ensure that our customers can continue to benefit from excellent connectivity across the UK, while enjoying all the benefits of supermarket mobile, including exclusive deals with Clubcard Prices,” added Tesco CEO, Jonathan Taylor.
