Kent distributor MoCo’s decision to stop trading with Orange, taken presumably as volumes slid and Orange requested it make its choices, should not be considered an indictment of either distributor or network, nor a new development in consolidation of the channel. But it is informative to consider its case.
MoCo has a pretty good reputation in the dealer market. It is the longest-established UK airtime reseller, having worked with O2 (or BT Cellnet) for 25 years.
Its distribution unit’s ARPU and churn levels are, respectively, the highest and lowest for O2 among Centre of Excellence partners, even if it cannot match the volumes of business Fone Logistics and Avenir in particular write for O2.
Which really gives credence to David Plumb’s contention O2 never planned to run its Approved programme as a restrictive exercise among Centre of Excellence partners.
MoCo’s profits are decent too, relative to much larger competitors and a sector under extreme sales- and margin-pressure.
Orange is apparently quiet in terms of sweeping changes to distribution, compared with rivals, and takes less credit for leading a re-shaping of the dealer market. But, in ways, its channel strategy is longer established. It has run its federation of direct resellers for ages, and bought into distributors Mainline and Midland long ago.
MoCo’s struggle with Orange’s volume demands is down to a combination of factors: the contracting dealer market plainly, the steady demand for new channel sales from all network operators, and the continuing favouritism shown certain connectors.
Mainline and Midland, despite protesting their commercial arrangement with Orange is consistent with others’, construct packages those other distributors cannot match. Orange has a stake in them, and no drive on Orange volumes by independent distributors will put them on the same footing.
Fone Logistics, Avenir, Redstone and HSC face the same dilemma with Orange, and will weight their network preferences accordingly in the longterm.
And what of 3, which takes a more expansive approach to distribution on account of its diminutiveness, and with which distributors recently dropped by ‘big four’ networks (Avenir, MoCo) are now claiming total mutual support.
The thing with 3 is it is still playing the acquisitive volume game in third-party retail. T-Mobile and Orange are also to an extent, but their commercial packages do not measure up and their commitments to the channel are changing, if not uncertain.
Their half-way revenue share schemes are symptomatic of this. And the present instability of T-Mobile UK, under new management with a brief to slash op-ex, must put in danger high third-party acquisition costs.
3 is also paying well for SoHo and SME connections from dealers – its onerous clawback terms are ultimately eased by the money on offer from it.
It has developed its network proposition as well. Its press releases all refer to it desperately as a data network, but its behaviour in the market backs its drive for that, and its new MVNO focus via X-Mobility appears like it might embolden niche groups like the independent channel.
Its 20:20 partnership should help bring some revenue from the hyped world of mobile applications down through the channel.
So the seriousness with which MoCo and Avenir, and everyone else, take 3 should not be in doubt.
Meanwhile, MoCo is constructing its own fixed line proposition to take to market; engaging in this new sales channel convergence in that way.
Last issue, we looked at it from a hardware view with Micro-P specifically, and this issue makes the case for bombastic reseller Daisy as new king of convergence.
Airtime distributors have struggled so hard for so long to keep multiple paymasters happy that perhaps they have been unable to innovate beyond straight mobile airtime connections.
With this ongoing carve-up in distribution, and players picking sides, the best of them will perhaps start to innovate and expand their horizons in the manner of Mirco-P, Daisy and certain others.