O2 has no plans to turn its retail estate over to be completely run by franchisees, amid a current drive to reinvigorate its shops.
CEO Ronan Dunne said franchises were an essential part of the operator’s long-term strategy, but were as important as any other channel. Last year, O2 announced plans to almost double its number of franchise stores from 120 to 200, out of its total 450 store portfolio. The move was seen as a means of lowering costs at the operator, as its parent company Telefónica continues to struggle with its debt pile.
Speaking to Mobile, Dunne dismissed suggestions that it could outsource its entire retail estate to franchisees in the longer-term. He said: ‘We see a mix between our retail and franchise stores. At this stage, it depends on the locations and opportunities. There will always be a mix of direct and franchises. If you look at it, it’s like what we have at the minute with the mix of our direct and indirect channels. Things may change but there will always be a balance of distribution.’
He said he had no qualms that O2’s retail proposition could be diluted if a range of different companies take over its management. He said: ‘With franchises, the customer experience is defined by O2. They don’t consider it a case of ‘franchise [stores] versus O2’. It’s always useful to have flexibility in investment in the high street.’
Earlier this year, O2 stopped offering new contracts through channel partner Phones 4u. The move was seen as a precursor for the launch of the operator’s Refresh tariff, which allows consumers to upgrade at any time and is similar to Phones 4u’s Jump proposition, where consumers can upgrade every six months. Dunne denied there had been a falling out between the businesses and said it continued to offer upgrades, Sim-only and prepay. He said: ‘The relationship is absolutely fine… Part of this [decision] was managing the balance and mix of our business.’
Dunne said Refresh, which is being taken up by 90% of new contract customers since it launched, was a means of demonstrating the value of the services O2 provides and trying to lower churn from its existing 1.0% level. He said: ‘With a lower churn, we will have a better financial performance. If a customer stays longer, there’s an immediate financial benefit for us.’
He said he expects the contract market to migrate to two different groups, as more people sign up to Refresh. He said: ‘There will be some who want a sexy handset every six months and those who will now have the confidence to keep their phone as long as they like.’
Operators should be 'given freedom to shape the market'
O2’s CEO has warned any overly aggressive regulation would hinder investment in the market, as Ofcom looks to deal with mid-contract price rises.
The regulator is set to make a ruling by next month about a consumer’s rights when an operator increases its prices over the course of a contract. Telecoms companies said the increases are inflationary and in response to rising costs.
While Tesco Mobile, which runs on O2’s network, pledged to fix its monthly charge during the life of a contract, Ronan Dunne said it had no plans to follow suit. He defended the rises as necessary and said they only amount to around an extra 50p on a monthly bill. He said: ‘Our view is regulation shouldn’t unduly shape the market. It’s a highly competitive and transparent market and we should be able to afford to invest in products and services.
Samsung delays disappointing
O2’s CEO said the stock shortage of the Samsung Galaxy S 4 was a disappointment but added the first quarter was an open market for handset sales.
He said: “There hasn’t been any particular standout [product this quarter]”. He said while the iPhone 5 has performed well, it did suffer from some stock issues. He also said he was impressed by HTC’s performance, despite its latest flagship also being hit by stock shortages. He predicted the Q10 would prove a popular device among ‘BlackBerry aficionados’.
The Galaxy S 4 was the most recent flagship to go in store but its launch was delayed by a week after what Samsung described as ‘unprecedented demand’. Dunne said: ‘Like everyone else I was disappointed with the launch volumes of the Samsung Galaxy S 4, but this was sorted out very quickly.’
The operator is currently seeding 4G-ready Sims into its latest handsets, in preparation for when it launches next generation services later this year.
Author: Graeme Neill