So the terms have been agreed, but what does it all mean for the mobile industry
Objections and arguments
The prospect of four network operators becoming three will clearly attract the attention of the regulators. It will all come down to whether a strong enough reason be given for O2’s sale.
The cost of investing in infrastructure is the most convincing argument that O2 can make to the regulator. This has all the more weight when you consider the ‘national roaming’ agreement the Government has with the network operators in which they have committed to reaching 90% coverage in the UK. It would be pretty embarrassing for the Government if the Hutchison Whampoa deal was blocked by the regulator and then O2; a network with 25 million customers was unable to reach the coverage targets it had been set.
The fact that such huge sums are required to compete in the network operator space is an issue for debate, but it is an unavoidable. O2 CEO Ronan Dunne has told Mobile previously that it is the driving force behind the deal: ‘This has been driven by the supply side of things rather than the consumer, in my opinion. If you don’t have the financial capacity and scale to compete in this market then you will fall behind.’
Which is the magic number?
One issue that has got the industry talking is about how the two brands would mesh together. They serve very different markets and turning a Three customer into an O2 subscriber and vice versa doesn’t appear to be a straightforward process.
When interviewed by Mobile on the topic at the beginning of March O2 CEO Ronan Dunne presented a different take on the issue; a multi-brand strategy: ‘We have Giff Gaff and the JV with Tesco, which shows that you can successfully operate a multi-brand strategy in the UK. The number of propositions at the customer interface level, rather the number of networks, is the key to giving the consumer choice.’ he said.
It’s worth considering that many argued that you couldn’t mix Orange and T-Mobile customers, that their identities were too distinct. But 5 years or so later, both of those brands have been abandoned and now the one that replaced them EE is faced with the prospect of being re-labelled once again by new owners BT.
The long and winding road
Like the BT and EE deal the buzz around the takeover masks the reality that this is just the start of a very long process. Vodafone are likely to be just one of the parties who are sure to register their disapproval of the deal amongst other potential obstacles.
There are likely to be a number of twist and turns on the road to this deals completion and we’ll no doubt be surprised on a couple more occasions.
In the meantime the two firms will continue to fight for customers. However maintaining focus amidst the chaos of a takeover will be difficult task and needs strong leadership as Ronan Dunne acknowledged to Mobile recently.