O2 holds out on upgrades, but is it neglecting midmarket users?

MOST READ
LATEST NEWS

Compare broadband and
mobile phone deals at Top10.com

EVENTS

4G World 2010 October 18 - 21, Chicago

4GWE Conference, Oct 4-6, Los Angeles

The Location Business Summit USA, 14-15 September, Crowne Plaza, San Jose

Advertize your telecoms job

JOBS

Mobile Industry & Technology Journalist - freelance

HOT TOPICS

O2 holds out on upgrades, but is it neglecting midmarket users?

By CAROLINE GABRIEL

Published: 24 October, 2008

READ MORE: O2

O2 UK has devoted much of its marketing activity to the iPhone, but what of the O2 subscribers who are not won over by the device's charms; who want one of the rival smartphones O2 has felt obliged to reject, like the N96; or who still want to use their phones mainly for voice calls or cameras? It seems these are increasingly being treated as second class citizens.

This could lead to an increase in churn, especially with moves like O2's decision to try to delay upgrades for three months to save cash in the current fiscal year. While the cellco would argue that, as long as losses are balanced by new iPhone additions, a shift to the higher value customers the Apple handset brings would be welcome. But for years to come, mobile operators' bread and butter will still be with the midmarket, and with O2 potentially losing its Apple exclusive as early as a year from now, it is playing a dangerous game of putting too many eggs in one basket.

Actually, it has three baskets - the other primary products being pushed this quarter are the mobile broadband dongle, and SIM-only offerings. Both these have little or no upfront cost - 'non-hardware contracts' are highly attractive to carriers looking to reduce cash spent on subsidies during the last quarter of their financial years. And the dongle can either lure new users, or persuade existing customers to take out an additional contract on top of the phone.

All this means the carrier is turning its face away from the bedrock of its user base. Along with T-Mobile UK, it is pushing customers to hold out for up to three months for upgrades. This is partly a head office matter - parent companies Telefonica of Spain and Deutsche Telekom of Germany want to cut costs and pull cash out of their UK arms as they head into the downturn. But in O2's case, it is also yet another sign of the way the iPhone is taking priority over other choices.

O2 customers who want to upgrade are being offered a £15 a month discount on their bill if they agree to wait until January (after the company's financial year), so that less cash will be spent on subsidies during the current quarter. But dealers are complaining that they are forced to churn O2 customers to other networks, as many are keen to get their hands on a new phone during the holiday buying season, when the smart new models appear. T-Mobile UK is understood to be offering customers a similar deal if they wait until January for their upgrade, but is offering a £5 discount off bills instead of £15.