Our take...
With Virgin Mobile entering the mobile broadband market in the UK, the competition between the operators will be increased. Mobile operators should focus on improving speed and data allowance in order to claim a larger share of the market. As Virgin Mobile currently operates over T-Mobile's networks, it is likely that the mobile broadband speeds provided will closely match those of T-Mobile UK. T-Mobile currently states a maximum theoretical download speed of 7.2 Mbps, although the company's advertised download speed is 4.5 Mbps. T-Mobile also provides upload speeds of up to 1.4Mbps (in theory), which comes handy for laptop users wanting to upload/email medium size files while on the move. Virgin mobile is likely to follow the footsteps of other leading mobile operators in the UK such as Vodafone, 3, O2 and Orange and may provide mobile broadband bundles with a PC or fixed broadband package (O2).

Mobile operators' main concern is to gain new contract subscribers, reduce churn, compensate for voice revenue decline, and capitalise on 3G. Mobile broadband has the ability to fulfil all these tasks and therefore mobile operators may play with profit margins to emphasize one aspect or another.

With a prepay subscriber base of over 90 per cent Virgin Mobile intends to use the service to push its subscribers on to contracts, thereby capitalizing on increased customer life time value. Virgin Mobile's parent company Virgin Media also offers fixed telephony, broadband and TV. The MVNO is already using Virgin Media's quadruple play services to drive contract sales up.

Mobile wholesale agreements are typically limited to voice services and Virgin Mobile will be the first MVNO to offer mobile broadband in the UK. Mobile operators typically become very protective when it comes to their 3G networks because: 1) They paid billions of pounds for it and they want to make sure that they make the most out of it 2) Capacity is very limited; the infrastructure cannot support mass market consumption of mobile data services.

As mobile data consumption grows rapidly, mobile operators in the UK are desperate to extend their backhaul network capacity (i.e. first part of the network which links 3G base stations to the internet) and are looking to extend partnerships with fixed-line operators such as Virgin Media. Screen Digest believes that T-Mobile possibly lowered its wholesale prices so that, in exchange, Virgin Media gives them a preferential backhaul/core deal.