Cutting Room: Quarterly figures, perfect storms


Quarterly numbers
Some loose arithmetic for you. Around 55,000 net customers were lost in the three months to March 31.

The four UK network operators, plus Virgin Mobile, signed 660,000 contract customers in the period combined, and shed 725,000 prepay customers.

That is according to the statistics we have easily to hand, and a fair reflection of the UK trend; not likely be much altered by taking into account Three, nor the considerable MVNO brands Tesco Mobile, Asda Mobile and BT Mobile anyway.

Among the big four, around 117,000 net subscribers were found from somewhere – 579,000 signed up to contracts with them, and 462,000 quit their prepay services.

T-Mobile is the strangest of operations among them. It, alone, added prepay numbers (248,000 of them). It, alone, lost contract customers (80,000). It is a trend it has kept up for several quarters on the spin.

And considering Orange and T-Mobile together, it is clear their is little overlap; Orange is pitching for premium customer entanglement and T-Mobile is, in sum, punting out cheap SIMs and airtime, sometimes with handsets bundled in and paid handsomely for by the customer.

Its profits have soared as a result – by contrast, O2 has managed very reasonable, though incomparable, growth of 7.3 per cent on much bigger funds, Vodafone has haemorrhaged margin and Orange has not filed yet.

That perfect storm
Ronan Dunne (pictured), O2 chief executive, put it well, describing the coming juggling act facing operators as a perfect storm, as they are forced to dig deep to fund spectrum purchases in 2011 and build out compatible infrastructure subsequently; data networks optimised for voice, as opposed to voice networks optimised for data.

And those investments must be made when the broader economic climate is difficult, in the face of a government that must get to grips with the budget deficit and is presented with a neat fund raising opportunity in the shape of these 2011 auctions.

Moreover, the market is saturated, and Ofcom has just issued a preliminary rule on mobile termination rates that will see them ramped down by degrees, from 4.4p to 0.5p by 2014. And then there is regulation around roaming charges and all the rest of it.

As an aside, Ofcom’s rule, if it is made binding as is likely, will make prepay a rapidly outdated concept for most operators, even those with scale.

T-Mobile, as part of a dominant joint venture company, will suffer most consequently in terms of money it loses to prepay calls being terminated on its network. It threatens its longterm strategy, surely.

It is an ugly situation for network operators, especially so when profitable growth comes only by clever and deliberate marketing, deal making, customer care and shrewd management of resources.

Vodafone is struggling to achieve such feats with what it has got, and what it has grown and known over decades. Orange and T-Mobile have to achieve the same from the tricky task of integrating unwieldy great organisations.

Perhaps the energy and spirit that comes with such an ambitious project will make it simpler, than to go through the halls of Newbury, say, to dig out disgruntled ‘water carriers’ in the corners.

Harsh, but it’s a thought that reflects the apparently never-ending struggle of correcting and freeing it. After six months of the right noise, Vodafone’s closest allies and oldest fans are complaining of muddy communications, information lockdown and antagonistic methods.

O2 meanwhile has to watch its creaky old infrastructure really does stand the test while it sorts all its ‘quality of service’ and traffic management issues.