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Ofcom has been pressuring UK MNOs to stop ripping off their customers at the end of their contracts and O2 has been the first to act.
One of the secrets of success if you work in a regulated industry is turning new regulations to your advantage. When they can get away with it all operators rip off their customers whenever they can, whether it’s exorbitant roaming fees, punitive charges for going over your allowance or failing to let you know when you’ve paid off your handset.
The smart MNOs are the ones that make a virtue out of doing what they’re compelled to by the regulator and that seems to be what O2 has done with the launch of its Overpayment Estimator. It’s actually a fairly rudimentary tool that just asks you about your current contract, tells you what you could save if you switch to O2 when it ends and then invites you to set a calendar reminder to switch to O2 when that happens.
The fact that this is even a thing is an indictment of how UK MNOs treat their own customers. It’s surely not beyond the capabilities of modern BSS to create an internal calendar marker at the start of a contract that automatically notifies them when it has finished and yet that often doesn’t happen. The only plausible explanation can be that they want their customers to keep paying over the odds and that’s not cool.
“It is simply not right that consumers across the UK are being charged for a phone they already own,” said Mark Evans, CEO of O2. “You wouldn’t keep giving money to your mortgage provider if you’d finished payments and owned your house – so why should it be that way for your phone? The mobile industry does not have the best track record on transparent billing practices. Our Overpayment Estimator is another positive move towards changing that.”
O2 has something called ‘custom plans, which it says don’t charge customers for their phones once they’re paid off and automatically lower their bills. If some of its competitors are still doing that sort of thing then O2 deserves some credit for exploiting this window of opportunity while it’s still open. The technology presumably exists to only charge people for what they use, but there’s no point in trying to walk before you can crawl is there?
O2 has launched a new project with the European Space Agency to address the notable strain which will be placed on networks with the introduction of connected and autonomous vehicles (CAVs).
While there has been a nod to the potential pitfalls of providing connectivity for CAVs, it hasn’t received a significant amount of attention to date. O2 claims it has done research on the segment, and wide-scale adoption of CAVs could generate up to 4 TB of data an hour. This would certainly place a strain on urban networks, but the usecases don’t end at the city limits; the strain placed on rural networks might be too much of a burden.
Code-named ‘Project Darwin’, O2 and the European Space Agency will work with Spanish satellite operator Hispasat, as well as various universities and vertical start-ups, to create connectivity solutions combining 5G and satellite communications.
“Project Darwin is an important piece of the connected and autonomous vehicle puzzle,” said Derek McManus of O2. “The research taking place at Harwell during the next four years will be vital in the creation of new transport ecosystems for the UK public and the companies that will offer these services.”
“Autonomous vehicles need robust, high-speed mobile data connections to operate effectively,” said Catherine Mealing-Jones, Director of Growth at the UK Space Agency. “Building the technology to link them to telecoms satellites will allow you to take your car wherever you want to go, and not just to areas with a strong mobile signal.”
This is one of the questions which the telco seems very keen to avoid at the moment; what is being done to ensure 5G is not an ecosystem for the privileged? Or at least not for a longer period of time than is necessary.
Having just driven back to London from the South-west, your correspondent can confirm the patchy nature of 4G. Telcos and government will tell you this is an area which is constantly improving, but it isn’t although we were taking countryside backroads. The M4 is one of the most important and busiest arteries of the UK. Maybe we are expecting too much, but the number of times devices dropped off 4G coverage is not encouraging for these future usecases which depend on constant and reliable connectivity.
These are questions which are perhaps being addressed elsewhere but not directly in the UK. How quickly is the network growing? Are network densification strategies advancing as quickly as other nations who are driving towards the 5G promise?
Business Secretary Greg Clark has stated the UK has ambitions to lead in the CAVs segment, but to do this the right connectivity conditions need to be in place. It does not appear the network has been rolled out far or densified enough to meet the demands of this emerging segment, whenever it appears.
Satellite is often seen as the ugly duckling in the connectivity mix. It is often considered as an option for the developing nations, and largely overlooked for those who can afford to build connectivity closer to the ground. However, digital divides exist all around the world, albeit nowhere near as extreme or consequential as regions such as Africa. If there are ‘not spot’s, or even areas of weak/patchy signal, some 5G usecases are undermined. CAVs is one of them.
Attitudes towards satellite connectivity have been shifting over the last 12 months, and it does appear to be increasingly becoming an important ingredient in the connectivity recipe. The UK network is evolving and improving, but it is far from perfect; satellites look an asset which are becoming more of a necessity than back-up.
With a new Opensignal report suggesting O2 has the slowest download speeds of the UK MNOs, the telco has hit back suggesting experience is about more than just speed.
According to the report, O2 has the largest proportion of customers experiencing slower speeds across the UK. This is down to a number of different factors, one of which is how spectrum holdings have shaped 4G deployment strategies.
The image below outlines what percentage of customers are experiencing different speeds across all the UK MNOs.
While this might not paint the prettiest of pictures for O2, the telco has pointed out faster is not necessarily better.
“O2’s network deployment is focussed on customer experience and demand rather than maximum capabilities of certain aspects of network performance such as download speeds,” an O2 spokesperson said. “Some of the most popular mobile applications such as playing the game Fornite or streaming high definition content from Netflix require around 3-5 Mbps.”
Such is the obsession with speed, the entire telco industry is built on the concept of ‘bigger, faster, meaner’. Performance of telcos are measured on average speeds, however, one should perhaps question what speeds are necessary to produce the desired customer experience. Sometimes 10 Mbps is all that is required.
“We continue to invest £2m every day to improve the network experience for our customers as well as using a combination of technical and customer insight to gauge how well the network is performing and how satisfied customers are with their service. For the second year running O2 recently won uSwitch’s 2019 award for best network coverage as voted by the public and continues to have among the lowest levels of churn in Europe.”
In fairness to O2, you can’t argue with the numbers. In terms of market share, O2 is the leading telco in the UK. It must be doing something right otherwise how would it maintain this position? It isn’t the cheapest, the fastest or one which can offer any sort of convergence offering.
This second image from Opensignal indicates the spectrum holdings which are being utilised by each of the telcos.
As you can see O2 is heavily reliant on the sub-1 GHz bands. The advantage of this band is greater range and better indoor coverage, though there is a trade-off when it comes to speed. And while some might complain about the lack of horse-power, it doesn’t seem to matter than much at the end of the day.
In the last financial results, O2 boasted of year-on-year revenue growth of 5.3%, a total subscription increase of 2.3% and customer churn of 0.9%, the lowest in the market, it claims.
What is worth noting is this is relevant for today. This might seem like an incredibly obvious statement, but developers are constantly bringing out new applications which test the boundaries of acceptability. Video and more immersive gaming content are ensuring demands on the network, and capable speeds, are a constant threat.
For the moment, this position from O2 seems perfectly sustainable, but how long the status quo lasts remains to be seen. Speed is not necessarily the defining factor of experience today, as long as fast is fast enough.
Telefónica’s otherwise flat quarter was bolstered by strong performance in its UK and Latin America South units, which delivered 5.3% and 15.2% organic growth rates, taking the group level growth rate to 3.8%.
Telefónica reported its first-quarter results, with the total revenue at €12.611 billion, an increase of 3.8% in organic terms. This means adjustments were made to the reported numbers considering impacts of exchange rate moves, regulation and reporting standard changes, and special factors, for example adjustment made to the Argentina numbers on account of the hyper-inflation. Otherwise, the total revenue would have reported at € 11.979, or a 1.7% decline from a year ago. The quarterly operating income before depreciation and amortisation (OIBDA) reached €4.264 billion, up by 10.3%; and the net income grew by 10.6% to reach €926 million.
The Telefónica group is now serving a total of 332 million subscriber accounts (“accesses”), 6 million less than a year ago. The total mobile accesses by the end of the quarter stood at 267 million, down by 4 million from a year ago. But the good news for Telefónica is that it actually grew the contract customer base by 7.5 million over Q1 last year, meaning the loss is mainly on the pre-paid market, down by 11.5 million. It also grew its fixed broadband (including FTTx and cable) customer base by 2.1 million over the course of the year.
“The first quarter results showed a significant improvement in revenue growth trends and double-digit growth in net income and earnings per share. Strong cash generation, which was three times higher than the figure reported in the first quarter of the previous year, allowed for an acceleration in debt reduction, for the 8th consecutive quarter, further strengthening our balance sheet,” commented José María Álvarez-Pallete, Chairman and CEO of Telefónica. “We have started the year by extending our leadership in fibre and 4G deployment, testing new 5G capabilities and making progress in the UNICA virtualisation programme, allowing us to continue gaining customer relevance through better experience and higher average lifetime.”
Ángel Vilá, Chief Operating Officer of Telefónica, introduced the Q1 results and its outlook to 2019 annual outlook in more detail in the video clip at the bottom (in Spanish, with English subtitle).
While the its two biggest markets, Spain and Brazil, managed to stay stable, delivering modest organic growth of 0.3% and 1.7% respective (+0.3% and -5.2% in reported terms), Telefónica’s UK business registered a strong 5.3% organic growth to reach €1.67 billion (£1.47 billion). Excluding the exchange rate impact, the UK business would have reported a 6.6% revenue growth to reach €1.691 billion (£1.488 billion). The company is now serving 32.7 million mobile subscribers, up 2.3% over Q1 last year, which includes both customers on O2 (25.1 million) and those on the MVNOs using Telefónica networks (Sky Mobile, giffgaff, Lycamobile, and Tesco Mobile).
“This is another good set of results building on our momentum from 2018. We have delivered further revenue and customer growth underpinned by our award-winning network and market-leading loyalty,” commented Mark Evans, CEO of Telefónica UK. “We are committed to making every day better, providing customers with compelling reasons to join and stay with us through attractive propositions such as O2 Custom Plans.”
Looking across all the Telefónica markets, the UK registered the lowest churn rate of 0.9% among in its postpaid customers. In comparison, in Telefónica’s other European markets, the churn rate of contract customers was 1.6% in Germany and 1.7% in Spain. Comparable churn rates in markets like Chile and Mexico ran around 3%.
Telefónica attributed high customer loyalty, among other things, to its aggressive investment to improve its networks. The company claims it is investing equivalent to £2 million a day to strengthen its network and increase its reach.
One of O2’s focus investment areas in 2019, in addition to the planned launch of 5G, will be high density venues, including sports arenas, shopping centres, hotels, and conference centres. Already serving the Anfield Stadium in Liverpool and the Lord’s cricket ground in London with improved networks, in collaboration with the Wireless Infrastructure Group (WIG), an infrastructure company, O2 is planning to upgrade and improve its coverage and capacities in other high usage venues.
“While we look ahead to 5G we also continue to focus on our existing network capability. We strive to deliver a great network experience to all our customers, including some of the UK’s busiest locations where network demand is at its peak,” said Brendan O’Reilly, O2’s Chief Technology Officer. “Our multi-million pound investment with our partners at WIG should provide O2 customers with even better connectivity in the places they love to visit.”
Here’s more commentary from COO Ángel Vilá.
O2 has announced it will switch-on its 5G network at Millbrook Proving Ground in Bedfordshire to fuel the testing of autonomous and connected vehicles.
As part of the Department of Digital, Culture, Media and Sport’s (DCMS) AutoAir project, O2 and consulting engineering firm Atkins join the project to accelerate the development of 5G-enabled intelligent transport systems. The test will be on of O2’s first forays into the 5G world, with the rest of the network set to be turned on across 2019.
“5G will play a key role in how our country develops over the next few years,” said Brendan O’Reilly, O2’s CTO. “If implemented properly, 5G has the potential to drive economic growth, create jobs and enable a new host of technologies – including self-driving vehicles. That’s why we’re delighted to be supporting the trial activity at Millbrook, alongside ambitious partners who share our vision of building a truly Mobile Britain.”
With the UK recently crowned on of the worlds leading authorities on autonomous and connected vehicles in a recent report, a lot depends on the success of these projects to prove the hype. Future of Mobility Minister Jesse Norman has already promised autonomous vehicles will be on UK roads by 2021, so let’s hope this project is a success; no-one wants to see a politician with egg on their face.
“The AutoAir consortium is pleased to welcome O2 and Atkins the 2nd phase of the project”, said Paul Senior, CEO of Dense Air and Chief Strategy Officer of Airspan Networks, one of the founding members of the project.
“O2’s integration and commercialisation of the 5G network at Millbrook to support both public and private mobile use cases is a world first and will be a reference deployment for the UK mobile industry as it moves to support for 5G applications for Industry 4.0, large enterprise and Government.”
Using 2.3 GHz and 3.4 GHz spectrum, the test will aim to accelerate the adoption of connected and self-driving technology in the UK. Part of the test is aimed at improving road safety and helping traffic authorities to monitor and manage traffic flow. It also follows other trials to demonstrate seamless and efficient handoffs between different radio sites.
Earlier this year, McLaren, another partner in the consortium, lend one of its sports cars to the test. Driving around the track at 160 mph, the vehicle was able to receive and send data at 1 Gbps, while also sharing real-time UltraHD 4K video between a network of moving vehicles.
“This project will transform the way we design, maintain and operate on our future networks,” said Lizi Stewart, Managing Director, Transportation at Atkins. “Developing the first 5G neutral network in the UK will allow us to continue our drive for innovation and industry-changing initiatives for the transportation sector.”
While connected vehicles are certainly a prospect on the horizon, autonomous vehicles might be a distant dream. The technology might be progressing, but there is much more to such a revolutionary change in society than simply making a robot work. For O2, this will be of minor concern as the telcos strides towards the 5G finish line.
Telefonica’s UK business O2 has confirmed it will launch 5G in 2019, though there will be much more of a business twist to the new connected euphoria.
Mixed in with the management team reporting financial results for the last twelve months, the team announced the network upgrade, which will be fuelled by a £1 billion CAPEX investment over 2019. What is worth noting is the O2 management is pitching 5G with more of a business facade than competitors are offering.
Although specific dates have not been revealed, the network will first launch in Belfast, Cardiff, Edinburgh and London, while the rollout will continue throughout the rest of the UK through 2020, as compatible smartphones become more readily available.
“Mobile is one of the most powerful opportunities for growth in the economy and 5G is just the next step,” said COO Derek McManus. “We’re building a 5G economy is coalition with British business.”
What is not entirely clear is how much of this £1 billion investment will be directed towards 5G and what will be left over for the 4G network. O2 has been investing healthily in its network over the last couple of months, CAPEX investments in 2018 accounted for 12.9% of total revenues, and CEO Mark Evans expects this to continue.
According to Evans, 5G will not be forced on consumers once launched, but there will naturally be early adopters queuing up. Selling 5G to the consumer is going to be a tricky task for many telcos, 4G is arguably fast enough for all available applications and services, and to ensure O2 is generating ROI, the enterprise world is going to be a focus for the team.
This is not necessarily out of character for the telco either. Over the last couple of months, O2 has been targeting enterprise for growth, perhaps realising fortunes are not going to be realised in the consumer segment. As the market leader, O2 now has 32.6 million connections on its network (including MVNOs) and the expense of artificially attempting to force future growth might exceed the benefit. Growing in the enterprise market, while maintaining a leadership position in the consumer world, is certainly a sensible strategy.
“The company is taking a cautious wait and see approach to 5G,” said independent analyst Paolo Pescatore. “However, it can’t afford to be left behind. It is apparent that initial consumer appetite for 5G will be limited. A greater focus on enterprises is a sensible approach.”
Over the last couple of months, O2 has been running its FTSE 100 5G testbed to identify the usecases which mean the most to British business. Although McManus was not forthcoming on specific partners and customers, he did suggest there was strong progress being made in the agriculture, retail, transport and industrial segments. O2 will certainly not turn away any consumers who want to upgrade to 5G, but there does seem to be much more of a business twist to the super-charged network plans than we’re seeing at other UK telcos.
That said, while there is certainly a stronger focus on business, fixed wireless access seemingly has not been ruled out as a 5G usecase, potentially opening the door for a convergence offering. Evans pointed out that there would certainly be customers who would use the 5G connectivity for FWA but stopped short of completely ruling out this type of service from O2.
According to both Evans and McManus, FWA can make sense in some circumstances, take rural locations as an example, but long-term there are better options. With the country being fibred up, FWA as 5G validation is weak.
Moving over to the financial results, there are certainly some healthy numbers here. Total revenues for the last twelve months went just past £6 billion, a 5.4% year-on-year increase, while operating income was £1.6 billion, a 11.8% boost in comparison to 2017. O2’s subscription base grew to 25 million, with the total of 32.6 million including MVNOs such as Tesco Mobile, Sky Mobile and Lycamobile, as well as its own sub-brand Giffgaff.
CFO Patricia Cobian pointed towards increased data consumption and the introduction of three new offers as fuel for the positive results. In Q1, O2 updated its roaming plans to include the US and Australia (amongst other countries), while in Q2 the team launched a family plan and in Q3 Custom Plan debuted, allowing customers to decide how they pay for subsidized devices. With net additions standing at 282,000 across 2018 and churn below 1%, the offers certainly seem to be having a positive impact.
The Priority initiative has once again proved successful for the business. Some might feel this is a card which is underplayed by the O2 team, but customers certainly enjoy it. Over 8 million Priority offers accepted across the year, 42 million entries made to prize draws and £26.7 million saved in offers and freebies.
In terms of value adds, O2 is doing a great job in rewarding customers but limiting its own exposure. For example, the Telefonica parent group has relationships in place all around the world to fuel the roaming offer, the custom plans make few changes to revenues and the Priority initiative is more about connecting two parties, rather than a big financial outlay. BT has tried to add value by spending billions on TV content, but O2 is using current assets in an intelligent way to create value for customers and partners.
O2 isn’t changing the world with these results, but the UK is a relatively sedate telco market. That said, the telco is in a very healthy position moving forward. With a sensible touch crafting a business visage to 5G, a loyal customer base and big investment plans, O2 will not be easily giving up its leadership position.
Mobile operator Three UK has upgraded its network with a fully cloud-based 5G-ready core and has started internal trials of the service. It plans to launch 5G later this year.
Three announced that it is testing the world’s first fully cloud-based core network, delivered by Nokia. The software-based core network is 5G ready and is already carrying the ongoing trial for Three’s own staff. The trial is on the 3.4-3.8GHz spectrum Three bought with over £164 million in the auction concluded in April 2018.
The readiness is also achieved on the edge. Three announced that by December 2018, all its mast sites were already connected to the new cloud-based core networks, meaning when 5G is switched on all Three customers would be able to access 5G services, provided they have the 5G-enabled user devices (fixed wireless access modems, or smartphones and tablets).
Another infrastructure update Three announced is the expansion of its datacentre network. The operator used to have three datacentres in London and the Midlands. After the latest upgrade, it now has “21 data centres spread from as far North as Edinburgh to Portsmouth in the South” which are all live and “have been connected up with fibre”, said the statement. In practical terms, the more distributed datacentre network would reduce latency experienced by the users faraway from southern England, giving customers more or less equal user experience.
Indeed, “enhancing its market-leading customer experience and becoming the best loved brand in the UK by its people and customers” is the explicit target of Three’s latest network upgrading. The company reiterated its target to launch commercial 5G service later this year, after committing to invest over £2bn into 5G. “We have been planning our approach to 5G for many years and we are well positioned to lead on this next generation of technology. These investments are the latest in a series of important building blocks to deliver the best end to end data experience for our customers,” Dave Dyson, Three UK’s CEO, said late last year.
According to the latest telecoms complaints numbers released by Ofcom in January, Three received 4 complaints per 100,000 customers, narrowly behind its mobile competitors EE and O2 (3 complaints each) but way ahead of Vodafone (8).
Vodafone UK and Telefonica UK (O2) will be entering into a new infrastructure-sharing relationship ahead of the much-anticipated 5G rollout.
The duo already has an existing relationship for shared infrastructure activities, managed through the Cornerstone Telecommunications Infrastructure Limited (CTIL) joint venture, with this extension to include 5G at joint radio network sites. In theory, such a tie-up will allow the pair to accelerate 5G rollout plans over the coming months.
“We believe that these plans will generate significant benefits for our business and our customers as we move into the digital era of connected devices, appliances and systems on a mass scale,” said Nick Jeffery, CEO of Vodafone UK. “Customers will benefit from the best 5G experience available and we will deliver even faster speeds by using our spectrum holding more effectively.”
“I’m excited by the potential of these plans to meet the future needs of our customers while delivering value for our business,” said O2 CEO Mark Evans. “In addition, these plans would allow us to utilise the spectrum we acquired in the last auction very effectively.”
Looking at the 5G ambitions, both companies are being relatively coy with the specifics. Vodafone has confirmed it will launch commercial 5G services during 2019, exactly when is unknown though, while O2 has already stated it will not enter the fray until 2020. For Vodafone, some industry analysts have commented it is pitting itself in a race with EE, suggesting the launch would be at some point during early summer.
Perhaps this is an indicator of the importance of 5G scale. Being the first to market may not mean anything in the long-run, it’s a gimmick to include in advertising more than anything else, but nationwide deployment will be critical. O2 has a marketing leading position to protect, while Vodafone wants to recapture the fortunes of yesteryear. Clearly offering the 5G network with the widest coverage will be critical to winning subscribers once 5G vaults towards mass market adoption, and this partnership seems to have an eye on that.
As part of the agreement, more responsibilities will be devolved to the CTIL, allowing the JV to improve the efficiency of its operations and pursue opportunities to add further third-party tenants to the assets. The companies also intend to upgrade their transmission networks with higher capacity optical fibre cables, readying the infrastructure for low-latency use cases such as VR, while there is also an eye on future transmission operating model which could drive synergies for investment and operations.
Although trying to get telcos to play nicely with each other is a tricky task, the idea of shared infrastructure has been on Ofcom’s agenda for some time. It might create a bit of a red-tape maze in the first instances, though there are clear benefits to the concept.
“UK 5G roll-out is on the way and operators need to be more accepting of sharing infrastructure to ensure that coverage demands from consumers and businesses can be met as quickly as possible,” said Ingo Flomer, VP Technology at Cobham Wireless.
“Deploying new 5G networks typically require operators to install and maintain new antennas, hardware and cables, which requires significant planning, management and expense. By using one common architecture, operators can minimise cost and disruption.”
Fears the highly dense urban areas will be favoured over rural regions will certainly not be dismissed following this announcement as the cities are still much more attractive commercially, but with such partnerships the delay might not be as painful. A digital divide was created by the slow rollout of 4G, but shared-infrastructure relationships should ease this chasm, at least theoretically.
With smartphones around the world being reduced to doorstops thanks to Ericsson’s software issues, the vendor is potentially facing a damages bill in excess of £100 million.
The full extent of the impact is a bit hazy for the moment, though it is rumoured to be much more than is officially known. What we do know is the O2 network was down for almost all of Thursday, Softbank’s customers were plunged back to the paper days and there are ‘several’ other customers who were impacted by the issue.
Ericsson has confirmed there were others, though it is remaining tight-lipped on who these operators actually are. That said, as you can see from the crowdsourced data below from wireless coverage mapping company Opensignal, it would probably be a fair assumption to add Vietnam’s Mobifone to the list.
Looking at the bill, The Telegraph has reported Ericsson will be facing a global bill of £100 million to compensate customers for the oversight. Ericsson is yet to respond to a request for comment, though having admitted being the root cause of the data dessert there will certainly be conversations concerning compensation.
IWe understand O2 CEO Mark Evans is currently in discussion with the Ericsson management team regarding the whole issue, and the topic of damages will be included on the agenda. Ericsson UK and Ireland CEO Marielle Lindgren is certainly involved in these meetings, though we have not been able to confirm whether these specific discussions have been escalated all the way up to Group CEO Börje Ekholm.
In fairness to O2, it has not palmed off responsibility completely. Last week, it confirmed it would be reimbursing customers as a result of the outage. Pay Monthly, SMB business and mobile broadband customers will be credited with two additional days of monthly airtime subscription charges by the end of January. Pay-As-You-Go customers will be given a 10% credit on a top-up in the New Year, while PAYG Go mobile broadband customers will receive a 10% discount on a Bolt On purchase.
While some might suggest O2 is not completely blameless and should have had processes and systems in place to compensate for such instances, as the root cause of the disruption does lie elsewhere it does have some bargaining power in the talks. The rumoured £100 million bill would not all be credited towards O2, though as it seemed to be impacted the worst, it may well be seeking a large cheque to compensate for lost revenues associated with reimbursing customers.
Ericsson has narrowed the root cause of the issue down to two specific software versions of the SGSN–MME (Serving GPRS Support Node – Mobility Management Entity). These nodes in the core of O2’s network caused the calamity, as the license for the software expired.
For Ericsson, there might well be no choice. Some are suggesting up to 20 operators were impacted by the expired software license and considering the importance of relationships ahead of the up-coming 5G bonanza, the vendor will need to do everything in its power to ensure favourable terms. It seems buying its way out of this mess might be the only sensible route to take.