If an outsider observes the Italian mobile telecommunications industry, they might be tempted to think that it is an industry that has seen significant changes in its competitive dynamics due to much more competition for customers’ money.
After all, from having to pick an operator between the 4 incumbent MNOs 5 years ago, an Italian consumer today can choose his operator from more than 15 different operators.
However, in reality very little has changed and although Italian consumers have more operators to choose from, they still pay some of the highest prices in Europe. There are multiple reasons for why no new entrants have been successful and they vary from poor strategy to poor distribution to poor marketing. However, on a more overall level new mobile operators must offer a clear value proposition to customers relative to the incumbents. After all, why should you buy your SIM in your supermarket, bank or post office if these operators don’t offer any advantages over the incumbents? And in addition to that, they don’t have the same level of service that you get when you walk into the stores of 3/Vodafone/TIM/WIND.
There are several strategic problems and reasons for why the situation is like this but the most important one lies in the relationship between the MNOs and the MVNOs. You should only launch an MVNO if you feel you have an edge over the existing operators, and MVNOs should negotiate contract terms that allows them to execute on whatever value proposition they offer to customers (e.g. distribution, service, pricing). Observing all the Italian MVNOs reveals a similar an un-creative approach: “We have a brand, distribution and a popular website, we’ll leverage that by launching an MVNO”
Italy has the highest mobile penetration in the world. 1 in 2 Italians have two mobil phones but from an operator’s perspective you want to sell them the primary SIM because that’s where the money is. What you wont hear from any of the MVNOs is that almost all of them only have second SIM customers and their numbers look terrible. As it is today, most MVNOs are part of large parent companies which can afford to bank roll their failed strategies. Negotiating with MNOs in Italy is difficult and full of secrecy so it is time consuming and difficult to find the best deal for an MVNO and they can only succeed if MNOs see them as an effective way to acquire customers. The current regulation, favours the incumbents and makes it impossible for MVNOs who can challenge the status quo to enter and that’s why despite 15 operators, they are all remarkably similar while Italian consumers continue to pay some of the highest prices in Europe. As much as I would like MVNOs to challenge the stale MNOs, consumers simply don’t have any good reason to pick an MVNO as their provider.