Giffgaff versus Goliath

Hello there, it’s Jillian in London. Mobile phone customers have many choices in the UK and Europe, and the big operators say that threatens [View in browser]( [Bloomberg]( Hello there, it’s Jillian in London. Mobile phone customers have many choices in the UK and Europe, and the big operators say that threatens their business. But first... Three things you need to know today: • Nvidia and Apple are considering investments in [OpenAI’s funding round]( • Alibaba is finally in Beijing’s good books [after yearslong scrutiny]( • Tencent and NetEase are rethinking [years of fruitless Japan investment]( The little guys I’ve just relocated to London as Bloomberg’s European telecom reporter, and I’m frequently met with an awkward question when I meet with company reps over coffee: Which mobile provider did you choose? The equally awkward answer: Not really any of them. In a stark contrast from Belgium, where I previously lived, the UK has seemingly endless options for phone providers and plans. I wanted solid coverage, lots of data and the ability to roam in Europe. So, with the help of colleagues and friends, I compared the options. Some had great coverage in my neighborhood but high prices. Others had better prices but potentially at the sacrifice of a good connection. And a number of companies wanted me to pay more to roam outside the UK. [VMO2]( looked likely to be the winner offering solid coverage, lots of data and free European data roaming, all at prices comparable or lower than their peers. Then I checked out the smaller companies and saw [Giffgaff]( offered essentially the same package for a lower price and no fixed contract. We got a winner. How is this possible? Well, Giffgaff is one of the many MVNOs, or mobile virtual network operators, that don’t build or operate their own network but rather license it from the major players and resell those services to customers. Giffgaff, for example, uses O2’s network. These companies have gained popularity and now make up 17% of the UK market, close to the market share of Vodafone, [according to]( Enders Analysis. MVNOs pose an interesting dilemma for the major operators. Companies like O2 can make extra money by renting their unused network capacity to smaller players, but they risk losing their own customers to those resellers of their bandwidth. Because, like online-only banks with no branches to maintain, an MVNO has vastly smaller costs than a proper network operator and can offer frankly irresistible pricing. Because of their popularity, MVNOs also have serious bargaining power. All the major players are vying to win contracts with MVNOs, thus driving down the prices. This is just one of the key problems that have major operators in the UK and the rest of Europe crying for more consolidation. Many of these companies argue they aren’t able to charge consumers enough to make a return on the capital needed to invest in good networks. This is precisely the argument made by Vodafone Group Plc, currently the No. 3 mobile operator in the UK, which is attempting to merge with CK Hutchison Holdings Ltd.’s Three, the nation’s fourth player. The merger is [in the hands]( of the UK’s competition watchbody. The Competition and Markets Authority will announce its provisional findings some time next month, but if its earlier comments are a guide, the two will need to assuage regulators’ fears that customer prices will increase. This same fear will plague any further efforts for in-market consolidation on the continent. That idea has gained more traction in Brussels circles, and companies are awaiting a report from [Mario Draghi](bbg://people/profile/1483687), the former Italian prime minister and head of the European Central Bank, that could add support. Draghi has previously [indicated he favors]( the idea, but officials from EU countries have told me and my Brussels-based colleague Gian Volpicelli that nations aren’t all sold on the idea. The concern? Higher prices for consumers. When faced with a telecom merger, regulators generally address the problem by pushing companies to sell spectrum or offer favorable terms to share network space with a new or smaller player. Vodafone Chief Executive Officer [Margherita Della Valle](bbg://people/profile/17055575) has been bullish that the company doesn’t need to offer remedies (although it already [made a deal]( with VMO2 to sell it spectrum if the merger is approved). Regardless, MVNOs are here to stay, especially with the popularity of eSIMs set to increase and pressured telecom CEOs eager to show MVNO deals to shareholders. As a consumer, I’ve had a decent, although not perfect, experience after I got hit with a big bill from calling someone in Germany. But not to worry — I found another MVNO that offers free data, texts and calls in Europe.—[Jillian Deutsch](mailto:jdeutsch24@bloomberg.net) The big story Aleksandr “Shurick” Agapitov spends hundreds of thousands of dollars to ensure his company’s name — Xsolla — is everywhere at major events in the video games industry. Agapitov is the founder of Xsolla, the payments facilitator [used by millions of gamers]( for in-game purchases. Now questions have been raised about whether Agapitov leans heavily on corporate revenues to support his flashy lifestyle. One to watch [Ayako Yoshioka, portfolio manager at Wealth Enhancement Group, says on Bloomberg Television that Nvidia’s results show it’s still early for the deployment of AI tools.]( Get fully charged Elon Musk’s fight with Brazilian authorities over misinformation threatens his X social platform and Starlink [satellite internet business](. Autodesk responded to activist investor [criticism by raising its profit forecast](. Billionaire Mukesh Ambani unveiled ambitious plans for Reliance Industries to develop [cutting-edge AI tools](. More from Bloomberg Bloomberg Tech: Humanity has always relied on technology to drive growth. With the emergence of artificial intelligence, tech companies will affect the economy, media and health like never before. Join executives, investors and business leaders in London on Oct. 22 to discuss the risks and rewards of this new age. [Buy tickets today](. 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