Latecomers to mobile phone markets struggle.

There was an interesting article yesterday that took my attention in my headlines telecom RSS sources. Reuters, published a short benchmark of three mobile operators that tried to break their respective markets whilst being the last player to penetrate it.

It’s amazing to see how 2010 is expected to be the year of return to profitability for these challengers (considering that their financial results show they were significantly EBITDA negative over the last four years and that countries such as Spain or UK currently hold the toughest recession and economical downturn ever). Having worked as a consultant for one of these players, and being the markets analysed Spain, Poland and the UK, I have my doubts: this turn-around into black numbers can come in 2010, but I would expect some delays, at least for Yoigo and 3. Good luck in any case.

Very interesting article. Very good Reuters. Enjoy, CVA.

FACTBOX-Latecomers to mobile phone markets struggle.

As France prepares to accept bids for a fourth mobile phone licence on Oct. 29, here is a look at operators that have tried to break into European markets long after rivals. These three operators were the last to enter their respective markets and none have yet turned a profit.

SPAIN – YOIGO
Main shareholder: 76 percent owned by TeliaSonera
Price paid for the licence: 136 million euros in 2000
Investment in network and operations: 1 billion euros
Launched first commercial offer: 2006
Current market share: 2.2 percent
Financial results: 117 million euro in losses in 2008, aims for EBITDA profit in 2010

The Spanish private company obtained the licence in 2000. But it struggled to build a network and did not launch commercial services until 2006. As a result, Yoigo’s competitors had already signed up 45 million customers by the time it came to market. Telefonica’s Movistar brand held half the market, while Vodafone and France Telecom’s Orange split the rest. Yoigo, which is 76 percent owned by Norwegian telecom firm TeliaSonera, has spent 1 billion euros on infrastructure, recruiting clients, and building a brand in recent years.

It billed itself as the low-cost alternative to the other players. Yet Yoigo still has only 2.2 percent market share in Spain, or 1.2 million clients. It aims to turn an operating profit by the end of next year but will not have positive free cash flow until 2011. Last year, TeliaSonera said it was considering selling all or part of its stake in Yoigo, but did not get any attractive offers. Now it says it will keep Yoigo and focus on improving its results.

POLAND – P4/PLAY
Shareholders: Tollerton Investment, Novator Telecom Poland
Price paid for the licence: 85 million euros in August 2005
Investment in network and operations: 150 million euros annually, according to company
Launched first commercial offer: March 2007
Current market share: 6 percent
Financial results: Loss-making, EBITDA profit by end-2010

Play entered Poland’s rapidly growing mobile sector almost three years ago as the fourth player. Since then, it has quickly built up almost 6 percent market share by pitching itself as Poland’s 3G leader with a focus on mobile Internet and multimedia. Play also aggressively competes on price with its larger rivals.The rest of the Polish market is split roughly equally between France Telecom’s Orange brand, Polkomtel’s Plus and Deutsche Telekom’s Era.

Play aims to have double-digit market share by 2011 or 2012. Revenue last year was roughly $300 million and is forecast to be $450 million this year. It aims to turn an EBITDA profit by the end of 2010.

UNITED KINGDOM – 3
Shareholders: Hutchinson Whampoa (0013.HK)
Price paid for the licence: 4.4 billion pounds
Investment in network and operations: undisclosed
Launched first commercial offer: March 2003
Current market share: 8 percent
Financial results: Loss-making, analysts say could break even on EBIT this year.

Hutchinson’s 3 brand entered the already crowded U.K. market more than six years ago and has since stuggled to win over customers in the face of larger, more established rivals. 3 remains the smallest operator in England with 8 percent market share. It competes against Vodafone, Telefonica’s O2 (TEF.MC), France Telecom’s Orange and Deutsche Telekom’s T-Mobile (DTEGn.DE).

The group’s strategy was to offer cheaper tariffs and bill itself as a leader in 3G and mobile broadband. As part of its technology focus, 3 allows customers to use on-line free calling service Skype from their mobiles and has its own version of YouTube where people can post, share and watch videos from their mobiles.