Magazine article Marketing

The Link in Cellnet's Chain

Magazine article Marketing

The Link in Cellnet's Chain

Article excerpt

Cellnet's announcement last week that it is to acquire a 40% stake in The Link sent shock waves down the wires, writes Jane Bainbridge

Warning signals were sent through the mobile phone industry last week when Cellnet announced it is to pay up to [pounds]57m for a 40% stake in Dixons' specialist telecoms consumer electronics stores, The Link.

The acquisition of a share in a major retailer is further evidence that the mobile phone market is hotting up, with Cellnet, the nation's number-two network owner, attempting to close the gap between itself and rival Vodafone.

With up to 200 stores planned for the high street, Cellnet's distribution will challenge that of Vodafone's, which has steadily acquired a strong retail presence.

Undoubtedly, Cellnet's decision to invest in The Link bears all the hallmarks of a company aware of the need to improve its distribution network.

While Dixons, The Link's owner, and Cellnet look set to gain from the deal, it is the service providers (SPs) that appear to be on the losing ticket. As the middlemen of the industry, SPs are sold air time by the networks, and they put together a package which includes handsets, connection and billing. They are then responsible for the subsequent management of the customer.

The arrangement, where Cellnet and Vodafone have to deal with SPs while Orange and One-2-One deal directly with retailers, is dictated by law. The reasons date back to the days when Vodafone and Cellnet enjoyed a duopoly. The government introduced SPs to encourage competition in the market.

However, the big network operators want to shake off the restraints that were put on them by the government in the 80s.

One service provider says: "Cellnet and Vodafone have been happy so far because the SPs have subsidised the cost of acquiring a customer. But there's not enough room in the market now to give 25% to the middlemen. …

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