Octopus and Revolut were refreshing from disrupting the energy and banking sector, and shifted their sights towards the UK mobile communications market.
Both groups are considering breaking into mobile operations to have four and then three soon in a move that could pose a threat to incumbents in the industry.
Revolut announced on Wednesday it plans to launch comprehensive mobile phone plans in the UK and Germany as part of its “SuperApp.” Here you can cross-sell a variety of products in addition to core banking services. We already offer ESIMs that our customers can use for roaming overseas. This is the most popular non-banking product, Revolut says.
The move by FinTech continues to be significantly reformed in the UK mobile telecom market following news last week (a multi-billion-pound fund owning the energy company of the same name) was investigating the launch of a new mobile operator through its subsidiary FERN transaction.
“In our view, consumers are struggling to provide traditional networks due to hidden fees, painful customer experiences, and lack of transparency that is old and difficult to navigate (design). We are trying to solve all three.”
It’s not the first fintech to enter the market. Listed in the US with a market capitalization of $600 billion, Nubank launched a communications service called Nucel in Brazil last year. Others are considering that too. According to those familiar with FinTech’s plans, London-based rival Monzo has not ruled out offering similar products in the future.
Both Revolut and Tutopus-backed Fern products are mobile virtual network operators, or MVNOS, which serve customers, but do not build their own underlying infrastructure.
Instead, MVNOS saved up on a network of four major players, including BT Backing EE, Virgin Media 02, and SOON TO MERGED VODAFONE, to save on costs. Other well-known MVNOs include VM02-secured GIFFGAFF and VODAFONE subsidiary Voxi.
The setup raises two stages of challenges to current operators fighting virtual competitors for their customers, while simultaneously trying to sign challengers to use the infrastructure by signing wholesale transactions.
“The worst thing a major operator has done so far was getting MVNOS to gain foothold,” said an industry insider.
MVNOs are nothing new. The world’s first was Virgin Mobile in the UK in 1999. However, a study from Enders analysis showing that MVNOS added 1.6 million customers to its network in 2024 has pose a threat that has energized virtual operators in recent years.
In contrast, four major UK mobile operators have lost 180,000 subscribers. The first year in history saw them decline.
According to James Robinson, senior analyst at Assembly Research, this trend follows well-known brands like Tesco and Sky, as well as existing customers in bundled packages that also include services such as broadband.
Robinson believed that more than a quarter of all consumers could be using a virtual provider by 2028. This is up from 16.5% in 2024.
“When (Octopus and Revolut) performs a startup operation, these celebrities could accelerate their growth,” he added.
Enders’ communications director Karen Egan said the trend is partly owed to the costs of the living crisis, and consumers are more likely to use cheaper mobile alternatives.
Egan also said that in addition to consumer competition, there is an additional battle growing among network operators to sign transactions to bring them into the network.
“MVNOs are really struggling with other revenue growth sources and are getting more and more excellent wholesale transactions from network operators who have a decent level of spare network capacity,” she said.
Assembly’s Robinson said there is a high possibility that competition between networks hosting virtual operators will increase after the Vodafone-3re merger is completed in the coming weeks as the new company added the ability to host MVNOs.
“Now we can host three scaled players in the wholesale market to host operators. When we come together, it’s no wonder (newcomers) are thinking about mobile options,” he added.
VM02, which hosts MVNOs, including Tesco, is purchasing additional network capacity from the merged Vodafone 3 entities, according to anyone familiar with the situation that VM02 considers an additional attraction to the Challenger.
However, the impact of the new players was skeptical by New Street Research analyst James Ratzer, who highlighted the already crowded nature of the UK mobile market.
“New brands will increase competitiveness, but will probably only increase to a limited extent, as they are already a busy market with many other major success stories,” he said.
The performance of the “SuperApp” strategy, as plotted by Revolut, is also questioned by analysts who felt that movement was not working in the Western market.
Rupak Ghose, a former research analyst at Credit Suisse, said such apps worked in China due to a shortage of incumbents.
“In the West, most categories from social media to taxis to food delivery have existing (dominant players),” he said.
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While EE still considers it worth it to partner with MVNOs, people familiar with the company’s ideas say that many customers prefer to choose an established service with a trusted brand.
CCS Insight analyst Kester Mann said the entrance to Revolut, in particular, can prove to be a challenge for traditional operators, due to its well-known brand recognition and useful products.
Octopus, BT, Vodafone, Three and VM02 declined to comment.
Mann said:
