O2’s four-year market assault

Telefónica O2 UK has outrun the market for 16 quarters on the spin, or four years straight. It is impossible to argue with such a performance, especially in a consumer market that has been depressed for the best part of two years.

Its parent claimed 60 per cent of all net customer additions in its European operating markets (the UK, Germany, Ireland, Czech Republic and Slovakia) last quarter, ended September 30.

In the UK, its base jumped by 292,000 in the period, almost half the 321,000 UK net additions achieved by Vodafone, Orange and T-Mobile combined.

In revenue terms, it is outperforming the market by around 10 per cent – it is the only UK operator to report positive third quarter revenue growth.

And it has explained away its profit slump in the period, of 3.5 per cent, as the necessary result of a €28 million (£25m) restructuring of its customer services and marketing departments. Certainly, it is modest compared with red Newbury rival’s scything of its cost base.

This is a hard time for airtime provision. Voice and SMS revenues are in irretrievable decline, exacerbated by the consumer belt-tightening that has come with the economic slump. O2 appears to have read the market well.

It is tempting to attribute at least part of its success recently to its first-to-market ‘Simplicity’ SIM-only deal and its two-year exclusive on the Apple iPhone. These propositions have caught the UK consumer market in a kind of pincer movement.

The former has drawn the sting of the recession and delivered revenue unadulterated by handset subsidy, and the latter has stretched real spenders for the most iconic device of its time.

Telefónica O2 UK chief executive Ronan Dunne is loathe to simplify the firm’s show in such a way, and he has a point. Its assault on the UK summit started way before either proposition launched in 2007.

For an operator that has left itself open to criticism of its UK 3G infrastructure, O2 UK appears to have made a virtue of service.

Dunne points out its recent flexibility with the hard-up in a black economic era and its new innovations outside of its core airtime operation as instances of its free-thinking.

He suggests the O2 UK boardroom along the M4 corridor in Slough is a place where corporate benevolence and measure of public mood comes before bean-counting.

Give customers what they require, even when they do not yet know it, and the profit column will adjust itself accordingly.

It sounds glib, but O2 UK’s management team during the past four years – under Matthew Key and Mark Stansfeld,  former chief and sales director respectively, through to Dunne, and his lieutenants Ben Dowd and Stephen Shurrock – have cultivated a contemporary brand icon from within a messy industry.

It has led market changes, and it will close on the leader-elect when Orange and T-Mobile merge next year if relative performance is sustained. Rivals have restructured and struggled to find a voice in the market and shareholder value.

O2 UK has crossed over into the music and financial services industries, where the commonality is a mass market desire for efficiency, at a fair price.

Full Q&A with O2 UK chief executive Ronan Dunne in Mobile News issue 453 (November 30, 2009).

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