Winning on price is short sighted policy


As the battle between O2 and Vodafone escalates, Michael House argues that Vodafone’s tactics are only a short-term win and that their positions would become clearer if O2 released its sales figures to GfK

O2 business sales director Ben Dowd’s comments that Vodafone is “buying business” has taken the war of words between the two mobile heavyweights to a new level.

In today’s cautious corporate culture Dowd’s outspoken criticism of O2’s adversary is something of a rarity and it suggested he was truly grated by comments made by Vodafone enterprise director Peter Boucher (issue 502) and the alleged strategy being undertaken in Newbury.

Dowd’s accusations appear to be well founded. He has gone to careful lengths to highlight examples of what could be considered Vodafone’s dirty tricks. The examples speak for themselves – up to 80 per cent knock-offs on ARPU in some cases, which if true can’t be anything but truly damaging for the industry.

If Dowd’s examples and comments are to be believed, then it would seem Vodafone’s tactics are a short-term win. Such methods could indeed see them overtake O2 in the B2B ranking, but then what? O2 has spoken at length in the past about profits over volume, but judging by Dowd’s comments Vodafone thinks the opposite.

Such tactics may look good on paper, but don’t make sense financially. Market share in this instance would be irrelevant if the base were made up of low ARPU customers.

Vodafone refused to bite back, making it difficult to judge. But sources inside its offices have often questioned O2’s logic when it comes to market share, and with some substance.

Dowd is confident O2 holds a five per cent lead over Vodafone – around 40 per cent. But such stats are based on O2’s own findings as, according to Vodafone, it is the only network operator not to release sales figures to GfK – not that Vodafone will discuss its market share anyway.

Does O2 have something to hide? Unlikely, but the clouded, tense subject of market share would certainly be clearer if it did.