The UK's largest food supermarket chain, Tesco and the GSM network, O2 are creating a new 50:50 joint venture MVNO, Tesco Mobile. The new company will sell exclusively Tesco branded mobile services in Tesco stores across the UK, using O2's technology and network, and is expected to grow towards two million customers.
Tesco Mobile aims to launch later this year with the objective of having branded pre-paid phones on sale in stores and through tesco.com in time for Christmas, following which contract phones will be launched by tesco.com. Over the first two years of operation each company will invest US$13 million pounds in the joint venture.
Peter Erskine, Chief Executive of mmO2, said "The terms of the JV create a sound and sustainable business model for both parties. O2 UK will make a return both through Tesco Mobile's earnings and the more efficient use of our network capacity. We anticipate no material impact in the current financial year but positive returns in the future."
The joint venture agreement is open ended also also includes a five year lock in period during which time neither shareholder may sell its stake. Andy Dewhurst, has been appointed as Tesco Mobile's Chief Executive. Andy was previously Marketing Director of Tesco Personal Finance. Matthew Key, O2 UK's Chief Financial Officer, with be Tesco Mobile's Chairman.
Tesco Mobile will operate on a stand-alone commercial basis and will bear all subscriber acquisition costs.
Tesco is the UK's leading supermarket with over 14 million customers each week. Telecoms will be the third retail service offered by Tesco; tesco.com is already the largest on-line grocer in the world and Tesco Personal Finance has signed up nearly four million customers in just five years.
The UK already has several MVNO networks, the most sucessful being that operated by Virgin Mobile - although that, a 50:50 joint venture is reportedly in problems following an acrimonious court battle between the shareholders, Virgin Group and T-Mobile over incoming call revenue. Virgin Mobile is reported to have been looking to sever links with T-Mobile and switch its customer base to either Vodafone or O2."
Posted to the site on 5th June 2003
Posted to: www.cellular-news.com/story/9004.php