With a lack of new high-end devices and concerns with the economy, O2 CEO Ronan Dunne claims consumer confidence is low. He tells Michael Garwood what the operator is doing to reignite the market
O2 CEO Ronan Dunne tells Mobile News the lack of “excitement” and innovation in the mobile sector during the past six months has dented consumer confidence and affected sales across the entire industry.
Dunne was speaking after Telefonica’s Q2 results, released recently, revealed the O2 UK customer base had dropped by more than 140,000, and revenues were down 4.3 per cent to £1.3 billion.
The results also showed the number of new connections had dropped from 150,000 in the previous quarter to just under 25,000, taking contract numbers to 10.7 million. Contract ARPU also dropped from £35.30 per month to £32.90 in the past six months.
Its prepay numbers fell by 168,000, a decline of 0.7 per cent to 11.5 million. The drop was slight, however, when compared with that of T-Mobile and Orange parent Everything Everywhere (EE), which saw its base fall 412,000 in total. Vodafone’s prepay numbers fell by 345,000.
O2 prepay ARPU remains the highest among its competitors, at £8.90, compared with EE’s £6.40 and £5.90 with Vodafone.
Dunne says he remains satisfied with the results in what he calls a “challenging” environment, due to a lack of new products being released and the ongoing issues around the economy affecting consumer confidence.
He went as far as to say O2 and its rivals spent the first half of the year trading more as “utilities” rather than “innovative” and “exciting” businesses. It’s something he assures will change going into the second half of its financial year.
“There is no doubt the sector is feeling the pressure of lack of consumer confidence in the marketplace,” says Dunne. “In the first half of the year I would describe the sector as having relatively little sizzle. For handsets, we’ve had the Galaxy S II and a few more recently, but it’s been a relatively quiet start to the year with nothing much in the way of big new launches of products or services.
“It was an unexcited segment coupled with low levels of consumer confidence. The question is what exciting and innovative things can we all do to try and bring the customers with us in the second half?”
One “innovative” product already available as part of this strategy, is O2 Priority Moments, which launched last month. The service allows O2 customers to receive targeted and often exclusive offers from retailers such as WH Smiths and Odeon cinemas, directly to their mobile phone.
There are currently 75 offers available on Priority Moments, 50 of them exclusive. The Priority Moments application can be downloaded for free from Android and Apple, or accessed online from the handset. O2 began an above-the-line marketing campaign promoting the service at the beginning of the month.
Dunne claims, to date, it’s been an “overwhelming” success, with more than 200,000 people having already signed up to the service, and about 25 per cent of those accessing it on a daily basis – something he claims is unheard of in the traditional voucher space.
He claims services such as Priority Moments will help remove some of the financial reasons why a customer may choose to switch networks. He also says the service helps customers to budget for what they need, such as a mobile phone, and what they want, such as cinema tickets or discounts on relevant items.
Dunne claims the average customer spends £20 per month on their mobile. And while customers may be able to save a “couple of pounds” changing networks, Priority Moments could “potentially” save them the value of their contract each month through discounts on other items they purchase.
“We are really focussed on value for the customer,” says Dunne. “Not just the tariffs but how O2 as a brand can help them balance their budgets between what they have to buy and what they want to buy.
“The main thing is, customers can get deals on things they actually want at places they already shop. Some of the other voucher companies already out there are great if the customer wants to save money on liposuction or having their teeth whitened. But for the broader market, getting something like 50 per cent off the best-seller in WH Smith, or a meal deal for £10 we feel is more appealing.
“Potentially the bill they pay to O2 could be fully off-set by the savings which come from Priority.”
Full article in Mobile News issue 495 (August 15, 2011).
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