O2 is set to enter the fixed-line telecoms market where it will go head-to-head with BT nearly a decade after it was demerged from its former parent.
The mobile phone company, now owned by Telef?nica, the Spanish telecoms group, will bundle fixed-line calls into packages alongside its broadband and mobile products and offer discounts to customers who take all three services.
The move represents a strategy shift within the telecoms sector. When BT Cellnet, now O2, was demerged from BT in November 2001, the newly independent company was no longer weighed down by its former parent’s declining fixed-line business. It quickly moved from being the fourthlargest mobile operator in the UK to becoming the biggest by customer number while BT shifted its focus toward broadband and IT services to offset its declining residential customers. O2 overtook BT as the largest telecoms company in the country last year. However, with mobile markets now saturated, O2 has come full circle by turning to the fixed-line market to boost its presence in the home. Sally Cowdry, O2’s marketing director in the UK, said: “All markets seem to have their cycles.”
O2 said that it intended to offer some of the most competitive pricing in the UK, which means greater competition for BT, TalkTalk and other companies offering fixed-line services. For example, customers that have a mobile account with O2 may take a broadband and home phone package, including line rental, for £17 a month. The equivalent package from BT costs £15.99 a month after an initial promotional period but does not include the £11.54 monthly line rental fee.
Ms Cowdry said that the push into fixed-line services was the company’s most significant launch in the consumer market since it entered the broadband sector in 2007. She said that it had decided to enter the fixed-line market as many of its customers wanted to reduce the number of companies they dealt with. “Now is the right time for us to launch. It’s a natural progression,” she said.
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She added that the move into the more traditional telecoms market was also a result of a number of its broadband customers complaining of poor customer service and hidden costs when taking fixed-line calls from other companies. “Our customers are, for the large part, unhappy with their fixed-line providers,” she said.
O2 will launch its fixed-line product in March and initially market the new service to its existing customers. It also expects the addition of fixed-line telecoms to boost its share of the broadband market. The company, which has 21 million mobile customers in the UK, had more than 527,000 broadband customers at the end of September and is one of the fastest growing companies in the saturated broadband market. The Home Phone package will be available only to its broadband customers.
O2 entered the broadband market in 2006 when it bought Be Broadband, a small internet service provider, to tap into what was then a fast-growing market for high-speed internet.
The addition of fixed-line calls will enable it to compete with rivals such as Virgin Media, Orange and BSkyB, which is 39.1 per cent owned by News Corporation, parent company of The Times, which have boosted market share by bundling broadband with other services.
O2 also offers fixed-line services in Spain and the Czech Republic as part of the Telef?nica business.