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O2 be in England now that the iPhone's there

Loss of iPhone exclusivity in UK fails to dent O2's figures

Posted By Martyn Warwick , 01 March 2010 | 0 Comments | (0)
Tags: mobile markets iPhone Smartphones Finance apps

O2 might have lost it's monopoly on the supply of iPhones to the cognescenti technorati, the aspirational "me too-ers" and the downright gullible, but it still managed to sell more of the devices than its rival Orange did in the crucial Christmas and year-end present-buying bonanza. Martyn Warwick reports.

The latest figures from Telefonica 02 Europe show that despite now having to share the iPhone market with competitors such as Orange and Vodafone, O2 nonetheless consolidated its place in the trading quarter that ended on December 31st last. Over the period it signed-up 338,000 new mobile subscribers and 63,000 new broadband customers.

What's more, and despite the recession, O2's UK revenues were also on the rise. Indeed, they would have grown by a remarkable eight per cent in Q4 were it not for the effects of cuts in wholesale tariffs imposed by the UK's uber-regulator of telecoms and the media, Ofcom.

Much of O2's success can be laid firmly at the door of the increasing popularity of smartphones in general and the iPhone in particular. O2 now has five million smartphone subscribers of which two million are iPhone owners.

And, as we now know beyond doubt, the possession and use of smartphones does increase average revenue per user (ARPU). Over the course of 2009, smartphone usage resulted in O2 making £650 million in addition revenues derived directly from customer uptake of date-heavy services and applications. As Matthew Key, the CEO of O2's parent company, Telefonica Europe, says "Data is now a big business for us."

The run up to Christmas and the New year is always a good time for mobile operators and handset manufacturers but the latest figures have surprised analysts who were expecting more of a market downturn than actually happened. It seems that even in cash-strapped times the Brits continue their love affairwith/addiction to mobile phones. Actually, and despite O2's market-leading performance, Orange, Virgin Media and Vodafone also did very nicely over the holiday period, thank you very much.

They just didn't do quite as well as O2.

Interestingly, in a quarter that saw a variation from the established pattern, four out of the UK's Big Five mobile operators (T-Mobile being the exception, but it's on the way out anyway) also signed-up more new and repeat customers to eighteen-month and two-year long contracts than they did pay-as-you-go customers. This change has to be down to the ever-increasing popularity of smartphones and smartphone apps rather than anything else.

When O2's exclusive period as sole provider of the iPhone to the UK mobile market ran out and Orange was announced to be a new competitor distributor of the device, the hype machine at France Telecom (the parent company of Orange) went into overdrive and was left revving its guts out  for weeks on end. During that frantic period journalists were bombarded with press releases claiming that Orange would soon knock O2 off its perch.

That doesn't seem to have happened - yet. Nonetheless, the latest figures from Orange show that in Q4, 2009, it did shift 222,000 iPhones - and bear in mind that  Orange only got to distribute the device in mid-November so it put in a very creditable performance in a few short weeks.

That doesn't faze Matthew Key though. He claims that O2 has not experienced a run of mass defections of iPhone customers keen to secure a different deal with the likes of Orange, Vodafone or even Tesco. He said,  "We are seeing absolutely no evidence of customers leaving us to go back to Orange or Vodafone who had previously come to us from them to buy an iPhone."

However, Mr. Key also admits that the current rate of growth in the UK mobile market is probably unsustainable in the longer term. Commenting on the Q4 figures he added, "The UK market is probably the most difficult to call. Will it continune accelerating at the rate it has done? Probably not.”

But that's for the future. At the moment, O2 is sitting pretty pretty. Whether it is as a result of  residual first-mover advantage or simply because O2 has a better network that does a better job than its rivals and also provides robust and popular services and applications and good subscriber backup is a moot point that operators and analysts will argue about until the cows come home. But for the time being, O2's still up there at the top of the greasy pole.


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