How New Mobile Operators Are Shaping Telecom Competition and Pricing

The Impact of New Players on Mobile Telecom Markets

In many countries, mobile telecom markets are dominated by just three or four major players, creating limited competition due to the high entry barriers such as expensive licenses and infrastructure investments. This lack of competition often results in higher prices for consumers. However, the entry of new mobile network operators (MNOs) has shown to disrupt this monopoly-like environment. By analyzing data from 31 OECD countries between 2008 and 2022, it becomes clear that these new players bring about meaningful changes, including a decline in market concentration and lowered prices for consumers.

Market Concentration Declines with New Entrants

The effects of new MNOs on market concentration can be observed in countries such as France, Italy, and Japan, with notable examples like Free Mobile (France, 2012), Iliad Italy (Italy, 2018), and Rakuten Mobile (Japan, 2020). Using the Herfindahl-Hirschman Index (HHI) to measure market concentration, data from these countries revealed an average 10–12% decline in market concentration following the entry of a new operator. This reduction suggests that newcomers are effective in challenging established players, shaking up previously stagnant telecom markets.

Lower Prices for Consumers

A more immediate and tangible outcome of increased competition is a drop in pricing. The study analyzed Average Revenue Per User (ARPU), a standard metric for understanding what customers pay for services, and found that ARPU decreased by 17–28% in markets where new operators had entered. Interestingly, the price reductions were often initiated by incumbent operators rather than the newcomers themselves, highlighting how even the mere presence of competition can drive market changes. For instance, in France, the entry of Free Mobile prompted Orange, the leading operator, to lower its ARPU by 8%, while Bouygues Telecom, the third-largest provider, saw a 25% decline.

The Shift from Voice to Data

As smartphones and streaming gain popularity, mobile data has emerged as the primary focus of competition, surpassing traditional voice services. The data ARPU in several countries dropped by over 35% after the entry of new operators, while voice ARPU remained relatively stable. This trend underscores how both new and incumbent providers are targeting data-centric plans to attract and retain customers. For policymakers, this shift highlights the importance of fostering competitive environments that prioritize modern consumer needs, particularly as we move into the 5G era.

Pressure on Smaller Incumbents

The study also observed varying reactions among incumbent operators. Larger operators with strong brand loyalty and bundled offerings tend to weather competition more effectively. In contrast, smaller incumbents often face the brunt of pricing pressure. This was evident in France, where Bouygues Telecom faced significant challenges after Free Mobile entered the market. Such dynamics illustrate the transformative impact a new player can have, forcing all operators to reevaluate their pricing and service strategies to stay competitive.

Policy Implications for a Competitive Telecom Environment

For policymakers, the findings present a clear message: promoting the entry of new players and reducing market barriers can lead to more competitive, fair, and inclusive telecom markets. As mobile data continues to overshadow voice services, driving healthy competition will be essential for building digitally inclusive economies in the age of 5G and beyond. Encouraging policies that support market entrants can deliver substantial benefits to consumers while spurring innovation and development in the telecom sector.