MVNOs have seen their market share grow in the last few years. However, we believe that we are now at ‘Peak MVNO’, thanks to rising costs, a declining price differential with MNOs and Vodafone’s return to growth. We forecast MVNO’s share to decline to 6.6% in 2020 from 8.3% currently, even as TPG outperforms by gaining share.

The Australian MVNO market is peaking: During its recent decline, Vodafone Hutchison Australia (VHA) left the door open for other players to grab share, particularly from 2011 onwards. During this time, MVNOs picked up many of the price conscious customers. However, the competitive market dynamic has now changed. VHA is becoming increasingly competitive, costs are rising for MVNOs and the pricing gap between MVNOs and MNOs (especially for data-heavy plans) is decreasing. As a result, we believe that we are at or approaching the ‘Peak MVNO’. We expect the MVNO market share to drop to 6.6% by 2020 from 8.3% currently. Within this, we forecast TPG’s share to increase to 28% of all MVNO subscribers in 2020, up from 19% in 2015.

What’s in it for Telstra and Optus? Not much: Looking forward, Telstra and Optus have little incentive to encourage MVNOs as their fully owned flanker brands operate in the same market segments as the MVNOs. Vodafone would perhaps be an exception as it attempts to grab share and make efficient utilisation of unused spectrum, as its recent deal with TPG suggests.