O2 Has Light Bulb Moment, Puts 3G Dongle, WiFi and DSL Together in One Product

| Aug 04, 2008 | Consumer Broadband Services - Europe | Competitive Update

| Analyst: Ben Tudor

Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderate

Event Summary

July 31, 2008 -- O2 is offering a combined fixed and wireless broadband product to consumers. Customers subscribing to O2 Mobile Broadband for GBP 20 a month will also receive a DSL connection and wireless router, free for a year. Existing customers – wired and wireless – will also qualify.

Analytical Summary

• Current Perspective: Positive on O2’s announcement of a combined DSL, 3G dongle and WiFi product, available to new and existing customers, as the company is tying together a variety of disparate products in a single package, something operators are not always quick to do. O2 also stands to gain since it was the last mobile operator to market in the UK with 3G dongles, and its broadband products have not been this aggressively marketed before.

• Vendor Importance: High to O2, as the operator needs to bulk up its broadband customer base, both fixed and wireless. The company also needs to make up lost ground against other operators and capitalise on the positive effect of its iPhone sales contract.

• Market Impact: Moderate on the UK combined broadband market, at least in the short term, as O2’s innovation can easily be replicated by at least one other operator – T-Mobile. Other operators are also likely to follow suit, skipping on the WiFi and simply offering a combination of 3G data and DSL access.

Recommended Competitor Actions

• Vodafone Italia’s Station product offers an excellent combined service offering (see Vodafone Italia’s Station Arrives, May 29, 2008). While Vodafone’s individual country organizations launch services independently, Vodafone UK should consider a similar product that ties wired and wireless broadband together with a single piece of CPE.

• Orange should beef up marketing of its Livebox DSL router and bundle a 3G dongle with the device – something the company could do quickly and cheaply. Superior network coverage and throughput would negate any benefit of O2's customers using The Cloud’s WiFi network.

• BT should emphasise that much of what O2 offers is available with its BT Broadband Anywhere service, albeit with a free or cheap mobile phone thrown into the deal. BT has chosen not to throw a 3G dongle into its product line-up for now, but it should consider offering a dongle, if only as an add-on purchase.

• Virgin Media should consider adding mobile data services to its line-up, if only as a spoiler tactic. The company already offers TV, broadband and fixed and mobile telephony, but it is weak in terms of mobile data. An extension to the Virgin Mobile MVNO deal, or an agreement with a WiFi hotspot provider, would help.

• Carphone Warehouse will be reselling the O2 package, but it should also assemble its own, possibly by combining elements from a variety of operators and its own services. Carphone Warehouse can serve a role as an aggregator of – and single point of billing for – a number of services.

CLIENTS ONLY

Competitive Positives and Concerns

Recommended Vendor Actions

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