Mobile operator Vodafone UK is looking to improve the service it provides to MVNO customers through a deal with a cloud-based technology provider called Digitalk.

Based in the UK, Digitalk Ltd. has been investing heavily in a cloud-hosted MVNE (mobile virtual network enabler) platform that is designed to reduce costs and speed up service deployment for MVNOs, which rent capacity on mobile networks to provide mobile services of their own.

Vodafone UK , the UK's third-biggest mobile operator, supports a number of companies that have launched MVNOs in the UK, including Lebara B.V. , which caters largely to migrant workers, and supermarket chain Sainsbury's.

However, it has recently lost some high-profile MVNO customers to rival EE , the country's biggest mobile network operator, including broadband operator TalkTalk and fixed-line incumbent BT Group plc (NYSE: BT; London: BTA), which is currently trying to finalize a £12.5 billion (US$19.6 billion) takeover of EE. (See BT Locks Down £12.5B EE Takeover Deal and BT, EE Defend $19.9B Merger Plans.)

The operator may hope the partnership with Digitalk helps it to attract new MVNO customers and dissuade existing ones from leaving its network.

"We see the Digitalk platform as an evolution to address changing needs in the mobile space," a Vodafone spokesperson tells Light Reading. "Partners primarily choose Vodafone for its strong network and commitment to a partnership but it's equally important to address time to market and proposition flexibility."

Digitalk claims its technology can offer a major commercial advantage to MVNOs targeting specific customer groups or segments. "We provide a fully managed service -- the billing, CRM and core capabilities that an MVNO needs to operate," says Mark Ashdown, the company's chief strategy officer.

Digitalk began supporting MVNOs more than ten years ago but has been shifting its technology into the cloud over the past five or six years -- a move that is leading to major benefits for MVNOs, according to Ashdown.

"Clearly, in the cloud we can offer economies of scale in terms of cost advantage for MVNOs in the marketplace -- whether you are setting up a new business or migrating from legacy technology," he says. "One of the main drivers for the cloud is not having to invest in as much hardware."

Even so, the deal does not mean that Vodafone will be migrating all of its MVNO business to Digitalk's platform. "Where appropriate, our partners will continue to use existing Vodafone platforms," says the operator's spokesperson. "However, the MVNE will allow us to close down some legacy platforms that are understandably now becoming obsolete as this mature market evolves."

Lebara appears to be one MVNO partner that will continue to use legacy platforms for the time being. "This deal has no impact [on Lebara]," said the company in a statement emailed to Light Reading.

Although the current deal affects only UK operations, Vodafone says it has "existing relationships" with Digitalk, and Ashdown sounds eager to extend the MVNE arrangements to other geographical regions.

Digitalk currently maintains points of presence in London, Miami and Singapore and claims to serve customers in 50 countries. One MVNO already using Digitalk's technology is LlamaYa Móvil, a Spanish company that relies on the network of Orange Spain and targets immigrants in the country.

Next page: Opportunity not threat

Opportunity not threat
A number of European network operators have recently complained about pricing pressure from MVNOs, many of which have been steered into the market by regulatory authorities trying to mitigate the impact of recent takeover activity on competition.

Yet Ashdown believes MVNOs appealing to specific ethnic groups or niche segments do not pose a threat to network operators.

"In markets as saturated as the UK, the mobile network operators are wondering where revenue growth is going to come from," he says. "An ethnic or retail MVNO should be quite complementary and not cannibalizing revenues."

As Ashdown points out, some network operators have even launched their own MVNOs as a "secondary brand" strategy. A high-profile example is giffgaff, a UK MVNO that uses the network of O2, the country's second-biggest mobile operator, and is owned by O2 parent Telefónica .

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Nevertheless, Digitalk is skeptical of efforts to develop multinational MVNOs, noting the huge differences between various geographical markets.

"Regulatory and competitive environments are very different and while you can appreciate the sentiment of doing a pan-regional MVNO, the reality is that it requires a heavy investment," says Ashdown.

Hong Kong's Hutchison Whampoa Ltd. (Hong Kong: 0013; Pink Sheets: HUWHY) set up a global MVNE business in April, claiming it could provide a single point of contact for organizations keen to launch mobile services across a number of geographical markets, but Hue -- as the venture is called -- has yet to announce any MVNO customers. (See Hutchison Courts MVNOs With Global MVNE.)

As a privately owned company, Digitalk does not disclose details of earnings. But Ashdown says it has been profitable for years and has been funding its development of cloud-based technology through company profits.

Digitalk works with a number of partners on network infrastructure but owns the intellectual property at the heart of its platform, says Ashdown.

— Iain Morris, , News Editor, Light Reading