MaryLou: Butterfly effect


Watching the effects of the economic downturn unfold reminds me of the concept of a butterfly effect, where one small, seemingly innocent action causes a series of knock-on effects that culminate in something catastrophic.

Well, at least that’s how I heard it explained to me on a daytime talk show.

Anyway, this whole credit crunch business – count how many times you’ve heard that expression in the last 24 hours – is kind of playing out like that whole butterfly effect concept in a cyclical way, where that something catastrophic is being followed by even more knock-on effects.

Take, for example, an article in the esteemed London Metro newspaper yesterday about the condition of the British economy forcing nearly half of the country’s 500,000 Polish immigrants back home because the falling value of the pound means they aren’t making as much money.

While it did make page five of the Metro, it isn’t exactly groundbreaking news – the media has been running similar articles since the middle of last year, also highlighting an exodus of Australians returning home for the safer conditions of the economy there, and even British citizens heading abroad seeking greener, sunnier pastures.

Before you start wondering what this has to do with the mobile industry, think about all these people as mobile customers – shutting down their accounts.

Vodafone Ireland has even named it specifically as one of the reasons for deciding to downsize its workforce by 10 per cent, or 150 jobs out of its staff of 1500. The main reason it has stated is cost-cutting in the face of the declining economy, accelerated by droves of migrants based in Ireland heading home and handing back their SIMs.

You can only presume that this is impacting the UK networks as well, although most at the moment say it’s hard to tell as prepay churn is a constant thing.

While it hasn’t announced anything yet, Vodafone UK could be looking to follow suit with its Irish counterpart, in line with the group’s wider cost cutting goals set out by new CEO Vittorio Callao last year; meanwhile rival networks are keeping quiet about their predicament altogether.

Where the mainstream networks could be losing out, the new breed of ethnic MVNOs that launched their assault on the market last year could be picking up. It seems odd that this could be the case, considering migrants are their primary audience, but all are saying they’re on track to reach their customer targets thanks to targeted marketing and promotions, and their attractiveness to long term residents in the UK’s ethnic communities as an alternative to the mainstream networks.

Head of marketing for ethnic MVNO Lebara Jon Fawcett says the credit crunch is causing customers to reassess the value they’re getting from their mobile plan. He reckons, “During 2009, customers are going to keep looking at their outgoing costs and switching to MVNOs like Lebara from more established mobile network operators.”

The mainstream mobile networks are big, and the odd chink in their armour isn’t going to see them topple over, but if the chinks keep coming, the armour is going to start showing signs of wear and tear, as demonstrated by Vodafone Ireland. If the likes of Lebara are right, and start considering moving beyond prepay, we could be seeing the start of another butterfly effect with interesting consequences.