9/19/2008 1:17:00 PM
O2 set for ongoing commission shift in 10 days
O2 will join Orange in moving to an ongoing commission scheme from 1 October, replacing its existing upfront model, Mobile can reveal.
The operator will impose the new staggered method of paying its indirect partners, virtually all b2b dealers, from next month, linking how much it pays the dealers with how much they spend and how long they stay with the network.
All of O2’s indirect partners will be signing up on two-year packages involving ongoing commissions, following negotiations with O2’s indirect partners in its business division.
The operator is believed to have trialled such a a scheme with some of its major b2b indirect partners in the past.
A spokesman for O2 said: ‘We will become more profitable and have more profitable partners as a result of this.’
It comes as Orange will also impose a similar scheme, starting later this year which will have a similar shift away from paying all the commission up-front and deferring the payments across the tenure of the customer’s contracts.
The motivation in both cases is to make dealers and distributors have the same objectives as the networks: improve spend and cut churn.
Some smaller dealers and distributors are likely to be hit hard by the changes. One distribution MD said: ‘The mathematics of it dictate that you need a war chest to live with it. It’s a serious hit on cash flow.’
Dealers will be making a loss at the point of sale of a transaction, and possibly for several months as they will sink cash into handset subsidy while only seeing a small immediate return.
O2 is far less dependent on the indirect channel as Orange is, using dealers and distributors only for business connections.
Orange’s head of indirect channel, Mark O’Meara, said this week: ‘To improve loyalty and quality connections, we are considering… a revenue share commission structure where we will look to reward dealers and distributors for delivering quality connections.’
Click here to read about Orange’s move
Exclusive interview with O2’s business sales director, Ben Dowd, speaking about the changes coming soon