Rival collapses turn Amaysim profitable; Mobile virtual network operator backed by former Optus chief had to get to $100 million of service revenues before it could claim it was in the black

Rival collapses turn Amaysim profitable

November 26, 2013

Michael Bailey

Mobile virtual network operator backed by former Optus chief had to get to $100 million of service revenues before it could claim it was in the black. Rolf Hansen has forecast $100 million in service revenues for Amaysim in 2013-2014. Margins in the mobile virtual network operator market are as low as they will go, says industry watcher Telsyte, as one of the largest players revealed it turned a profit three years after launch – but had to get to $100 million of service revenues to do so.MVNOs are like mortgage brokers – they sell access to a mobile network, but don’t own it.

Amaysim, which has 500,000 customers for its budget bring-your-own-phone mobile plans that rent the Optus 3G network, was established by chief executive Rolf Hansen and three other founders, including Optus co-founder Peter O’Connell.

Its investors – including the Kahlbetzer farming family and microcap funds manager Acorn Capital – are savouring profitability after a year of high-profile collapses in the mobile virtual network operator market.

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ispONE, a reseller of Telstra’s mobile network, went into administration in August, taking Ruslan Kogan’s Kogan Mobile down with it. Red Bull Mobile, which re-sold access to Vodafone’s network, also closed.

Amaysim’s Mr Hansen says these were price competitors who underestimated the cost of a “decent front end” and viable customer service, as well as the data demand of customers as 3G networks accommodated video streaming for the first time.

Even burgeoning MVNO competitors such as retailer Aldi have had to backtrack on initial promises around unlimited data and introduce daily caps, according to Mr Hansen.

“Smartphone penetration has reached about 70 per cent of all mobile phone users, and we’ve seen compound annual growth in data downloaded of 60 per cent,” Mr Hansen says.

The Amaysim chief executive revealed the company has forecast $100 million in service revenues for the 2013-14 fiscal year.

“There will have to be price adjustments upwards as the network operators invest to cope with that, even though the price per megabyte is ­coming down and voice and text are reducing.”

Australia’s MVNO market is consolidating and maturing, and its margins will improve, according to research director at Telsyte Foad Fadaghi.

M2 bought Dodo this year and iiNet swallowed Adam Internet.

“We’re at the stage where a few players are reaching that critical mass stage and snowballing, which is going to make it a lot harder for new entrants to compete,” Mr Fadaghi says.

However, he notes that niche opportunities – for instance, to service specific regions or even ethnic groups – remain open in the MVNO sector.