Hutchison’s O2 move sparks dealer fears

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Three’s legacy in the B2B channel does not inspire confidence say many dealers

Dealers have raised concerns over Hutchison Whampoa’s decision to buy O2 for £10.25 billion, citing Three’s previous poor relationship with them.

Hutchison has entered exclusive talks to buy its rival. If completed, it would create the largest mobile operator in the UK with an estimated customer base of 34 million customers, ahead of EE, which currently has 26 million subscribers on its base.

Dealers have expressed fears over how the B2B channel would be affected, based on the operator’s performance in the channel historically.

Three exited the business market in April 2012 at a time when less than one per cent of its customer base was connected to B2B. In August 2013, Three CFO Richard Woodward claimed B2B had been a “distraction”.

One dealer said: “If you ask most dealers about their experiences with Three, they will tell you a negative story. Pretty much everyone got burnt by Three. They don’t tend to work well with dealers, or will work with us for a while and then cut us. If Three operates this in the way it did previously in B2B, then that’s bad news.”

Disjointed

Another said they fear a repeat over what he claims were poor commission payments from Three previously, as well as a disjointed business not working correctly due to poor integration.

“Three certainly struggled in B2B on its own and having discarded it completely for almost three years, their re-entry will not be without hitches. It never paid much for the business it did ask us to write, and that is a concern.

“I fear a repeat of the EE monster where the company may be rebranded but unless you assimilate the networks behind the scenes, it will continue to run as two separate businesses, where the left hand doesn’t know what the right hand is doing.”

One source pointed towards Three’s lack of interest in processing business through the indirect channel as a major stumbling block for dealers, claiming they are seeking more tied-in relationships with distributors rather than having to deal with a “faceless organisation”.

Concern

Three pulled its connections from Phones 4u in April 2012 and then from Carphone Warehouse in November 2013. Last February, CEO Dave Dyson said it had “managed to live without the big independents,” revealing 96 per cent of its customers came through direct channels.

“The big concern is Three’s lack of interest in the indirect channel,” said the source. “With the demise of Phones 4u, the networks think they can get that business directly themselves anyway. With B2B, it’s a slightly different animal, and dealers are looking for service direct from distributors and not from a ‘faceless’ organisation.”

However, some see the acquisition as positive, and are convinced Three won’t discard O2’s B2B operations based on the strong infrastructure it has built, and will instead capitalise on the opportunities presented to it.

“This opens the door for B2B opportunities for Three,” said one. “This will allow it to exploit areas it may not have had the chance to do so before now.”

A second one said: “B2B is about service.. I doubt you will see negative issues on service levels because O2 already has that infrastructure in place.”

Another source said dealers shouldn’t feel threatened because they will be signed to long-term contracts before the acquisition is approved.

“I would be surprised if Three got rid of O2’s B2B business. No network can forget B2B. Three running O2 will not cause any real disruption here. O2 is sending new contracts to dealers with extended terms. Whatever happens, they will already be legally signed to those contracts.”

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