O2 suffered one of its weakest set of results for years in the second quarter of 2011. Its overall customer base dropped by 140,000 to 21.1 million, with the operator adding just 24,700 contract customers in Q2 compared with 150,000 new contract customers in Q1. Prepay customers were also down by 168,500.
O2’s revenue for the quarter was down 4.3% in local currency to £1.3bn on Q2 2010, while pre-tax profit was down marginally to £407m.
Speaking to Mobile, O2 UK CEO Ronan Dunne said: ‘If you look at the first half of 2011 for the mobile sector and Q2 specifically, it was a period where consumers were looking to economise all round as their disposable income shrank. It was also a relatively unglamorous one for mobile, with not much in the way of new products or innovation about. Given that context, I think O2 put in a pretty solid performance.’
Commenting on O2’s poor contract additions in Q2, Dunne said it has stopped trying to migrate customers from prepay to postpay as a matter of policy. ‘We offer exactly the same value to prepay and postpay customers via our Simplicity Sim-only tariffs. We don’t actively migrate from prepay to postpay – that’s why O2’s prepay loss is less than our rivals and our postpay growth is smaller than the others. We have taken this view consistently over the last few quarters, so that’s why our mix is different.’
Looking ahead to the second half of 2011, Dunne said that the market would be flat to slightly declining. He said that O2’s focus would be to build on its reputation for customer service. The company is placing particular emphasis on marketing its Priority Moments proposition, which provides customers with vouchers for a variety of brands including restaurants, cinemas and shops.
Dunne said: ‘Priority Moments will be the single most important initiative for us, so we’ll deliver it to as wide a base as possible. Customers can save £10-20 per month using O2 Priority Moments, so that is very powerful in a time when people’s disposable income is falling thanks to energy inflation and petrol prices going up. As a result, they are clearly spending less. In Q4 2011, we will develop that further with the arrival of the O2 Wallet (NFC - contactless payments using a mobile) so customers can pay for their loyalty vouchers using their handset.’
Dunne indicated that O2 would be saving its powder for later in the year with the emphasis on financial services and mobile advertising in particular. ‘In the second half of 2011 we will address the customer’s primary need to meet their budgets and we will innovate around services.’