O2 UK chief executive Ronan Dunne (pictured) said last week that handset manufacturers would need to add “relevant functionality” to new devices, as about a third of the network’s contracts were SIM-only – compared with about two per cent more than a year ago.
Dunne named SIM-only contracts as one of the network’s strongest contributors to its positive Q1 financial results announced last week. He said the handset market was “polarising”, with an increase in customers moving up to smartphones or down to SIM only, and little activity within mid-range handsets and tariffs.
Said Dunne: “People aren’t saying that they aren’t going to replace their handsets ever, they’re just changing the phasing and timing of their purchasing. There is an opportunity for handset manufacturers here. Unless they make real changes to a handset – ie, not just changing the screen or the colour – there won’t be a real case for people to upgrade. Manufacturers are recognising the need to add relevant functionality.”
Dunne added that around about 40 per cent of O2 data traffic is driven by smartphones; more than that generated by mobile broadband. “Customers’ behaviour is changing so there will be more visibility of the smartphone segment within stores. We’ll start to see ‘smartphone’ sections in stores, rather than handsets being grouped by individual manufacturers,” he said.
“The smartphone segment is the only segment of the handset market that is growing. We have introduced ‘Guru Bars to our stores’, to demo some of the more sophisticated applications out there. Retail stores are becoming more of a showcase and experience environment.”
The network last week also announced the first of a new strategy of mobile marketing campaigns, offering customers free five-day passes and a personal training session from Fitness First in return for opting into mobile marketing.
“We’ll be bringing in more interesting new ideas to market reflecting customer insights,” said Dunne. “We’ve brought in Shaun Gregory from Blyk as our media manager and he has headed the first of brand partnerships.”
Dunne also said that the network was still working on bringing Near Field Communications (NFC) technology to market and would be working on “new ideas” this year. “We are working with retailers and their IT roadmaps,” he revealed.
Dunne said O2’s Q1 results showed that businesses could still perform well in the recession if they remained relevant to their customers. “In Q1, the economy slowed down faster than people thought, but we still managed to grow our revenue and profit by seven per cent, through strong contract additions and strong levels of customer satisfaction,” he said.
“In regards to the economy, it’s been indicated that there will be further deterioration ahead. I’m no economist but my instinct is that Q2 will be worse than Q1. I hope that during Q3 and Q4 year on year decline will start to slow. I don’t see growth being positive for some time. But we want to keep driving great experiences and value for customers and not use external circumstances like the recession as an excuse.”
O2 builds “affinity programme”
O2 has established an “affinity programme” with corporate customers that have made staff redundancies.
The programme allows O2 customers with a corporate contract to migrate to a person contract in a simple manner.
O2 UK chief executive Ronan Dunne said: “The SME business is going well. The corporate market is slowing down, as there are a lot of people going out of employment there. But we have built an ‘affinity programme’ with our corporate customers, where they can migrate from a corporate phone contract to a personal one.
“We’re also seeing traffic coming from fixed line to mobile, and there is a good chance customers will continue to give up fixed line altogether. We figure around 14 per cent of our customers don’t have a fixed line at all.”