J Sainsbury has pulled the plug on its struggling mobile network as its second attempt to crack the telecoms market ended in failure.
The supermarket group launched Mobile by Sainsbury’s in 2013 after forming a joint venture with Vodafone to much fanfare. The brand has flopped in the ultra-competitive mobile market after adding only 150,000 users since the launch and the retailer has decided to pull out of the market as a result with customers scheduled to be cut off in January.
It is the second time that Sainsbury’s has failed in the telecoms market. It launched a mobile brand called Sainsbury’s One in 2001 in partnership with O2, then called BT Cellnet. It attracted only 60,000 users and pulled out of the brand in 2003. To add to its misery, the arch-rival Tesco teamed up with O2 to launch the Tesco Mobile venture, which proved an immediate success and has since proved to be one of the world’s most successful “virtual” networks, with four million customers.
The decision to pull out comes after months of talks with Vodafone about the unit, which needed a big injection of funds to take the fight to Tesco Mobile and Asda Mobile.
“The performance and prospects of the Mobile by Sainsbury’s business in the prevailing market conditions did not support the expected returns for Vodafone as a joint-venture partner,” a spokesman for the mobile network said.
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Virtual networks are mobile brands that lease capacity from a network operator to offer their own services. There are dozens of virtual networks in Britain, including Virgin Mobile, BT Mobile and TalkTalk Mobile, and that rivalry is seen as key to maintaining competition as mobile networks have consolidated.
The failure of the Sainsbury’s project could raise concerns about competition. The Mobile by Sainsbury’s joint venture was inadvertently dragged into the debate about consolidation in the UK telecoms sector when TalkTalk told the Competition & Markets Authority that Vodafone had pulled out of its capacity deal and was set to terminate its agreement with the supermarket as part of a plan to exit the wholesale market altogether.
The broadband company, which switched to O2 to support its mobile brand, made the claims in a submission to the regulator amid concerns that the sale of O2 to Three could harm competition in the market.
Vodafone denied TalkTalk’s arguments in July and said that it would continue to support Mobile by Sainsbury’s.
Customers who had been tempted to join the supermarket’s fledgeling mobile brand will now have to seek a new supplier.
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The supermarket said at the time of the launch that mobile was a “natural extension” of its brand and that it could reward customers spending on their phone with Nectar points.