Orange dips its toe into the UK MVNO

Hot on the heels of the Vodafone/Asda announcement last week, advertising-funded MVNO Blyk has announced that Orange will be its host network provider. Blyk, which describes itself as a ‘pan-European free mobile operator for young people, funded by advertising’, aims to launch in the UK in end-2007.

This is the first MVNO deal for Orange in the UK, and it seems that other UK operators are now intent on giving T-Mobile a run for its money on wholesale MVNO deals. Vodafone already has an MVNO partner, Dot Mobile, which focuses on a similar target market, while T-Mobile has Virgin Mobile. However, Blyk’s unique business model is a major differentiator.

I think that advertising-funded mobile services is an interesting concept, and potentially very attractive to consumers and advertisers alike. However, i do see a few potential issues that may have an impact on Blyk’s success. I have to question how much it can really afford to give away for free. I do not yet know the precise details of its business model or its proposition to consumers, except that it relies on push SMS and MMS advertising, but we would be surprised if advertising revenues alone are enough to cover its network bill from Orange. In addition, it will need to offer excellent customer services and support, which will involve significant capex in the first year of operation. The fact that its business model is so unique means that it will need a strong team in place to deal with inevitable customer queries.

In order to succeed, Blyk will need to attract a fairly large number of consumers within its initial months of operation. The fact that it is offering something for(nearly) nothing means that it may well do so. However, it will also need to work hard at retaining these users past the first couple of months, once the initial novelty factor wears off.

The fact that it will be a SIM-only proposition means that there is also the possibility that consumers could try and exploit the service. They may simply swap in their Blyk SIM card to use their free minutes and texts and view advertisements when they feel like it, and then swap in another low-cost provider’s SIM for regular use.

The Blyk business model relies on advertisers signing up to target 16–24 year olds with advertisements. The initial announcement of six companies including Buena Vista, Coca-Cola and mobile gaming company I-Play is an encouraging start. However, in order for it to be a success we would expect to see more big-name advertisers signed up prior to its planned launch in end-2007.