O2’s lead over rivals Orange and Vodafone extends
O2 is also a big player in home broadband, second only to Sky
It appears that O2 has shrugged aside the slowing mobile market, and wider problems in the economy, with a record third quarter on several fronts.
O2 added more contract customers than its two nearest rivals (Orange and Vodafone) combined, and grew its revenue 8.7% in the quarter, taking it to £5.3bn for the first nine months of this year.
As well as laying down a ‘catch us if you can’ challenge to its rivals in the traditional mobile business, O2 proved it was a big player in the home broadband sector, with only Sky adding more customers in the quarter.
CEO Ronan Dunne explained the record performance across the business, saying: ‘There is breadth of success here; it’s across SME, corporate, prepay as well as consumer contract.’
However, Sim-only and the 3G iPhone are understood to have been the biggest factors in its performance in the mobile contract market.
Sim-only deals made up over 20% of all contract connections. Dunne said: ‘We’ve seen a polarisation of people moving up to the higher end or moving into the lower end. The bit that has contracted has been the mid-range.’
He pointed out a current trend which sees customers assessing the potential of the value operators can offer through Sim-only deals, by not having to subsidise handsets. As a result, users are trying to cut their contract tariffs or shift from prepay to contract. He also said many customers in the last quarter went onto Sim-only while they were waiting for a specific handset to become available.
There have been fears that, by focusing on Sim-only deals that roll month-to-month, operators, such as O2, now risk a high churn rate.
Dunne (pictured) said: ‘Our churn is lowest in the market, and among the lowest we’ve ever had. It’s all about delivering high customer satisfaction, an unequivocal commitment to service, if we truly live to our values.’
O2 suffered a 2.5% hit on its average customer spend (ARPU) as a result of more customers ‘trading down’ onto cheaper Sim-only deals.
Dunne suggested ARPU was becoming a less significant measure, with priority on profitability. ‘We are actually growing margin. We all have to be conscious that price erosion is happening. We all have to be operationally efficient.
‘We are [still] taking a challenger view. We are putting the customer first and are delighted with the support our people are giving. It has been the key to our success.’