Company Trend Analysis - Palmarium Will Need A New Business Model For Lebara - NOV 2017

BMI View: Despite Palmarium's acquisition of Lebara, we continue to be bearish about the prospects for mass-market MVNOs in Europe and other developed countries. Their strategy has not matched the evolution of the mobile market, and Palmarium will need to implement a totally new business model to improve Lebara's growth opportunities.

Palmarium, a Swiss private equity company, has acquired the Lebara Group through its subsidiary VIEO BV. No financial details were published. Lebara, a leading MVNO in France, Germany, Spain, Netherlands, Denmark, Australia and the UK claims to serve 3.5mn subscribers. We believe the operator has struggled recently, because its core business model of cheap international calls has been overtaken by the evolution of the market, something Palmarium will need to remedy to make its latest acquisition a success.

The limited growth opportunities have not only impacted Lebara, but the entire market (see ' MVNOs Need To Change To Meet Market Evolution ' , October 23 2015 & ' Few MVNO Winners In Developed Markets ' , May 23 2016). We have been bearish on the prospects for mass-market MVNOs like Lebara, because they will go head-to-head with the traditional network operators, without having the flexibility to adjust their plans to the reality of the market, despite some positive wholesale regulation, and the potential for some niche players to be profitable by focusing on a very specific segment. In the case of Lebara, the change of the market structure has clearly impacted its performance, even if the operator tried to diversify with the launch of a video platform (see ' Lebara To Benefit From OTT-Led Diversification ' , June 23 2015).

MVNOs Hindered By Low Growth And Data-Centric Switch
Europe Mobile Forecasts, 2015-2021
f = BMI forecast. Source: BMI, National Sources

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