O2 bullish as it embarks on a ‘customer focused’ new era

O2 is used to uncertainty. Over the past few years it has dealt with a parent company who wanted to sell, an emotional reunion with BT and a failed merger attempt with Three. But things are on the up.

Despite these events playing out in the background, O2 has continued to perform. Telefonica is no longer as eager to exit the UK market and there’s talk of a possible initial public offering (IPO).

Over the past 12 months the company has added 176,000 new customers (266,000 if you count M2M connections) and service revenues are up 2.2 per cent to £5.73 billion.

There are now 25 million O2 customers and 32.5 million on the network when you count mobile virtual network operators (MVNO) like Tesco Mobile and Sky.

O2 makes no secret of its belief that focussing on the customer experience is how to succeed in the competitive UK mobile market. It has attributed its recent growth to flexible tariffs, family plans and a screen replacement service.

And speaking at The O2 this week, CEO Mark Evans was talking about future and the role the customer will play in its vision. The thinking is simple, if you focus on user needs, they will use the network more and more revenue is generated. Data traffic on O2 is up 64 percent year-on-year and customers are spending more.

Customer focused network

“We’ve had a strong year,” he said. “We’ve delivered strong new propositions and some old ones too. Priority is the biggest digital loyalty programme in the UK.”

O2 is currently ranked as the worst performing network in RootMetrics’ independent network tests but the operator is critical of placing too much importance on such measurements. Instead it boasted about being named the best by customers of uSwitch because it’s an award voted for by the public.

“We read a lot about so-called independent surveys which are funded by operators,” he said. We invest £724 million in capital expenditure in our network. That works out at £2 million per day. We’ve been doing that for two years.”

For its part, RootMetrics believes its tests are scientific and reflective of the actual experience and the mobile operators are among its customers.

It doesn’t matter how good the customer service is if the network isn’t there and O2 recognises this. It has been testing small cell technology in Aberdeen and London as it looks to see how it can roll out LTE-Advanced and 5G.

5G plans

The customer focus extends to its 5G plans, with The O2 becoming a testbed for next generation networks later this year. It wants to see how people actually use the network so it can tailor its services accordingly.

“Just building a 5G capabie network won’t drive adoption,” added COO Derek McManus.

“Our customers will get a hands-on experience of what 5G actually is. Real customer participation in these trials will help us understand the standards and the use cases for consumers, businesses and the public sector.

“We can start to understand how we can effectively and rapidly deploy 5G when the time comes.”

But to start the trial, O2 needs some spectrum and the upcoming auction of 2.3GHz and 3.4GHz will be an opportunity to gain some. It was a critic of delays to the process caused be EE and Three, but it believes that if the UK is to harness the full potential of mobile, there needs to be more collaboration – and less red tape.

McManus said he had seen this approach first hand during his trips to Asia.

Working together

“What really struck me was how local government, operators and partners are all working together with one aim: better network connectivity,” he said. We need to do more of that in the UK.”

Planning permissions and local councils looking to monetise their assets rather than take a long view of the value to the wider economy are two issues McManus cited, while access to fibre is another.

Evans said that more fibre in the UK was essential to 5G. Openreach has pledged to connect three million properties to a fibre to the premise (FTTP) network, while Virgin Media also has plans for a limited rollout and TalkTalk is seeking funds to build its own infrastructure. Meanwhile Vodafone has partnered with CityFibre.

“The key for me is not the ownership [of Openreach], it’s the operating model that allows the rollout of fibre,” Evans replied when TechRadar Pro asked him about the current Openreach structure

“If our ambition is 3 million then we’re in trouble … If there’s no competition, there’s no incentive to roll out.”

Evans noted that if the mobile sector could support four operators building networks independently of each other then it should be possible to create the same conditions for broadband.

But would O2 ever get involved in the costly and resource intensive business of fixed infrastructure itself?

“Never say never,” he responded.

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