BT Acquisition of O2 Seen as Imminent

BT is expected to buy O2, getting back into the mobile business in a big way, “before the end of 2014,” U.K. financial site “This is Money” reports. That would give BT 24 million mobile customers, create the ability to provide a quadruple pay bundle, and likely trigger a reshuffling of assets in the U.K. communications market as well.

“Virtually all operators today believe that their future lies in a quad play, a supposedly new buying behavior expected to consolidate in future: In the operators’ view, customers will buy their fixed telephony, broadband, mobile, and TV services all from the same company and stay with the same provider for longer,” says Dario Talmesio, Ovum analyst.

“Mobile businesses are looking to move into broadband because their revenues are in decline,” many would note. “While revenues for the broadband industry have grown by four percent to five percent a year over the last two years, mobile revenue continues to decline by three percent a year,  according to media consultancy Enders Analysis.

Still, a successful acquisition of O2 by BT would put BT into contention near the top of the U.K. mobile market.

EE, the joint venture between Orange and Deutsche Telekom, has 33 percent share of mobile revenues in the U.K. market.

O2 has 26 percent market share in the U.K. market, as does Vodafone, with 26 percent market share by reported service revenue in the United Kingdom.

Hutchison Whampoa’s Three has 12 percent market share and and Virgin Mobile has three percent market share.

Growing interest in quadruple play retail offers is driven, fundamentally, by the contraction of mobile revenue, the shrinking of fixed network voice revenue and the degree of competition in the U.K. market.

Simply stated, contestants look to sell more products to a perhaps-smaller number of customers, boosting gross revenue and slicing customer churn by selling four products instead of one or two. ee

It isn’t rocket science.
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