O2’s Dunne: rivals too eager to lower prices

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UK boss says networks lowering the prices of high-end smartphones so soon after they go on sale are running unsustainable models

O2 UK and Ireland CEO Ronan Dunne has taken another swipe at the operator’s network rivals, accusing them of devaluing the market.

Dunne, who accused O2 rivals of writing unprofitable business in 2010, made the claim while discussing his firm’s recent financial results, which saw profit margins increase by 23.4 per cent.

He told Mobile News rival operators, without naming names, are too eager to reduce the cost of high-value, high-cost handsets on contract to boost connection numbers.

Dunne highlighted the price of the Samsung Galaxy S III, which is free on £46 per month and more expensive tariffs when connected to O2, but has been heavily reduced by other operators since its May 30 launch.

The device is currently free on Vodafone and Orange contracts costing £36 and £41 respectively while T-Mobile is offering the handset on a £36 a month contract with the handset costing £19. Three is charging customers £29 upfront but on a £32 a month contract.

Dunne claims margins in the market are of “real concern”, and operators should be doing more to demonstrate the value customers are receiving rather than being price-led.

“When the Samsung Galaxy S III launched, it was a premium product and we’ve priced it accordingly, but within days one operator had reduced their prices and a number of others followed. That is not a sustainable model.

“On the high street today, we’re probably £75-£100 more expensive on the two bestselling handsets on the market, the Apple iPhone 4S and Galaxy S III. It is a clear statement for people to say it’s fantastic value for being with O2, but it is not simply down to price.

“Everyone has to make a margin and there is one operator making 11 per cent, which simply doesn’t cover their capital, never mind their cost of capital. Everyone has to increase margins in a way where customers still see that they are getting really good value.”

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