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O2: ‘We’re the most innovative brand in the market’

Paul Withers
May 24, 2012

CEO Dunne says new customers are being attracted by the operator’s innovative value-added services

O2 says the recent surge in its customer numbers is down to it being the most innovative and appealing network operator in the UK.

This is according to O2 UK CEO Ronan Dunne, who was speaking after the operator revealed it had added 223,000 contract customers in Q1 – more than it added in the whole of last year.

Speaking to  Mobile News, Dunne explained the contract additions were the most O2 has achieved since Q3 2010, and that this was its best Q1 performance in contract since 2009.

The results indicated an increase of 48 per cent from the previous year, with O2’s contract customer base now standing at 11.6 million subscribers – 50 per cent of its total customer base of 23.3 million subscribers.

The results also showed smartphone penetration rose eight percentage points year on year to 41 per cent in the quarter, representing more than 80 per cent of handset sales.

Total ARPU was down 8.1 per cent from £18.31 in Q1 2011, with contract and prepay ARPU down 10.2 per cent year on year to £28.74 and £7.95 respectively.

Data ARPU rose 1.3 per cent from a year earlier to £8.75, and was also up from the £8.59 figure posted in Q1 2011.

Dunne said adding innovative, relevant services has allowed O2 to generate a new level of loyalty to its brand, offering customers the ability to save money without it having to cut its margins across core business areas such as calls, text and data.

He highlighted services such as O2 More, which has more than 10 million subscribers who receive targeted advertising, and Priority Moments, which offers customer-specific deals and discounts based on location.

Dunne said simply delivering good value and service has enabled O2 to hit its lowest level of contract churn since 2009, down 0.1 percentage points year on year and 0.2 percentage points sequentially.

Dunne said: “From a brand attractiveness and customer satisfaction point of view, we continue to lead the market. You have discounters in the market, like Three, but they have to discount because they don’t have the same brand and reputation that we have.

“We’re continuing to differentiate in the market and not looking to drive down pricing or destroy value – we’re looking to add value. It’s a combination of customer satisfaction and being seen as the most innovative and attractive brand in the market.

“People see us as more than just a tariff. We have innovations, with our own unique services. We continue to invest more than our competitors in the value-add stuff for customers, and they’re rewarding us for that.”

He continued: “Our contract net additions in the quarter are back to where we expect them to be. We’ve seen good progress in our business segment, with contract wins with the likes of BUPA and Sussex Water. O2 Wi-Fi goes from strength to strength with agreements with the likes of Costa Coffee, McDonalds, All Bar One and Café Rouge, and more than 10 million customers have now opted into O2 More.”

Nine months ago, following O2’s second quarter results, Dunne was downbeat about the market, describing it as “unexciting” because no new products were being released, something that was affecting consumer confidence.

However, he said that is now changing, and O2 will now be able to prosper.

He claimed manufacturers were too concerned with competing with the high-end iPhone rather than creating a point of di erentiation for themselves.

“It’s good to see price points coming down so that more people can have a smartphone. There was a phase where there were a lot of ‘me-toos’ to the iPhone. People weren’t really looking to differentiate and were instead trying to look more like it.

“In the past couple of months I’ve read independent reviews on handsets such as the HTC One X and Samsung Galaxy S III and they are not being classed as iPhone comparisons. They’re being seen more in their own right.

“We can’t just have the innovation at the £400 price point, and we need to ensure we’re giving great devices right across the price bands.”

Dunne promised to go beyond what O2’s customers expect of a mobile network and said its differentiation in the marketplace will see it succeed.

“We have a broad portfolio of innovative services and they are attracting and retaining more customers. In Q1 we executed this, and I’m pleased with the progress made. We’ll continue to exceed and excite our customers’ expectations.”

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