The high-end smartphone market is the most competitive it has ever been, the CEO of O2 has said, as consumers take advantage of a string of late 2012 handset releases.
Ronan Dunne was speaking as the operator announced its results for the three months to the end of September. Demand for the iPhone 5’s release in late September coupled with stock shortages led consumers to wait before upgrading to the new devices. Dunne said this led to a lower-than-expected number of upgrades, which provided an unexpected boost to the company’s margins, up 8.1% to 25.2%.
Between one and two million people were estimated to be out of contract this autumn, the greatest number the market has seen. Dunne said that the market has moved beyond the days of Apple’s smartphone dominance. He said: ‘The market is much more balanced at the high end than it has ever been. Both the Samsung Galaxy S III and HTC One X are doing well. The new Windows Phone 8 devices will have their own aficionados. With BlackBerry 10 – and without doing RIM’s media for them – there are a lot of operators who are very positive about the new features it will bring.’
Despite the iPhone 5 notching up five million sales in three days, Apple has been recently criticised for the handling of the launch of its iOS6 software. The manufacturer’s new Maps app was greeted with derision and led to the departure of iOS chief Scott Forstall, who reportedly left after refusing to sign a public apology for the problems with the Maps app. Apple CEO Tim Cook also axed head of retail John Browett, who was Cook’s first significant hire since taking over from Steve Jobs last year.
However, despite the recent missteps, Dunne said ‘you underestimate Apple at your peril’. He said: ‘I don’t think it’s a case of Apple going off the boil. It’s more that the competitors have stepped up and customers now feel they have some genuine choice. Apple has done everyone a favour by kicking us up the backside and saying that we can do better. Every handset is appreciably better than it was three or four years ago. I don’t feel customers are falling out of love with Apple.’
‘Focus on 4G services, not 4G speeds’
There is too much limelight being devoted to 4G speeds and not enough to the services and products that it will bring to the market, Ronan Dunne has said.
While not referring to either company by name, O2’s CEO issued a thinly veiled criticism of both EE’s recent 4G launch and Vodafone’s subsequent ad campaign, which highlighted its intentions to buy the low-frequency spectrum that will give better indoor coverage in the forthcoming spectrum auction. Dunne said the launch of next-generation services was a ‘mass market conversation’ and argued not enough was being done to publicise the benefits it will bring. O2 will only be able to launch a 4G service in spring 2013 at the earliest, following next year’s auction. He said: ‘What we want to focus on is why customers will want 4G – and that’s because of the products and services, rather than the merits of 800Mhz. That’s not exactly a pub conversation and that’s important because 4G is a mass market conversation.’
Despite EE having a headstart of as much as six months, Dunne said his focus was implementing its network infrastructure share with Vodafone and concentrating on developing differentiated services. He said: ‘We want to be the curator and aggregator of customer experiences; it’s a natural role for O2. We deliver great value and loyalty through the likes of Priority Moments. We will be making the case for 4G in a very customer-centric way, rather than just saying “my technology is faster than your technology”.’
‘No outage guarantee’
Despite O2 suffering its second network outage in less than six months, the operator can offer ‘no guarantees’ about future system problems.
CEO Ronan Dunne said the outages, which were unrelated but affected eight million customers in July and two million customers last month, were ‘hugely frustrating’ for the company. He said: ‘The key for me is that any technology comes with challenges, and we are not the only network to suffer outages.’ Following the second outage, O2 said it was spending £10m in removing an Ericsson database that had been suffering faults.
Editor: Graeme Neill