O2 UK Deep Dives into the UK Fixed Market with a Five-Year Deal with BT Wholesale

| Sep 18, 2009 | Business Telecom Services - Europe | Competitive Intelligence Report

| Analyst: Gary Barton

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

Event Summary

September 16, 2009 – O2 UK has entered into a five-year agreement with BT Wholesale that will give the MNO access to BT’s complete UK fixed network services portfolio. Customers will receive billing, account management and frontline support from O2. BT will operate and manage all of O2’s fixed services and provide secondary support to O2’s customers. O2 has produced research to show that UK enterprises increasingly want their services from a single provider.

Analytical Summary

• Current Perspective: Positive on O2’s five-year deal with BT Wholesale, which will allow it to offer a wide range of fixed line services. O2 has a proven track record as a provider of advanced mobility solutions to large and small enterprises and the fixed services experience of parent company Telefonica will help the UK MNO to become a threatening integrated communications provider.

• Vendor Importance: Very high to O2 because it has removed a major block to it competing for a large number of corporate and SME contracts. The operator has stated that 25% of all RFPs it engages in require fixed line services at some level, O2 is now in a position to win more of those contracts and secure these contracts on its own rather than in partnership with a fixed operator. Furthermore, O2 will be better able to deliver high margin managed services and going forward it will have a pool of its own fixed customers to whom it can cross-sell managed services.

• Market Impact: High to the UK Large Enterprise and SME markets as mobile operators have been competitive in these arenas for some time and O2’s wholesale deal with BTW will allow to it to compete for a much larger number of customers. Mobility is an increasingly mission critical part of enterprises’ telecoms requirements and fixed operators such as BT, COLT and Easynet will have to respond to this enhanced threat.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Business Telecom Services - Europe | More information
| Client access - Full report in Enterprise Mobility - Europe | More information

Recommended Competitor Actions

• All fixed operators should reinforce that for the majority of customers fixed Internet connectivity and network services remain the most mission critical business service. Fixed operators should focus on aspects such as quality of service and uptime guarantees and should underscore the point they are providing the service over their own network and not having to rely on a third party for fix-times.

• BT can portray itself as the UK’s most comprehensive telecoms solutions provider to large enterprises and SMEs. The incumbent can point to the fact that it can deliver NGN MPLS and Ethernet services on net to the majority of the UK and it can also point to advanced UC solutions supported by vendors such as Cisco, Mitel and Nortel. BT should underscore that its wholesale relationship with Vodafone is successful and long standing which gives its mobile services a healthy degree of stability. BT can also point to established data centre services such as storage and SaaS.

• Vodafone should highlight that it has also just secured a five year deal with BTW for the provision of fixed services across the UK. The operator should underline its huge experience in providing managed solutions such as security, email, and unified comms to the large enterprise market. To SMEs, Vodafone can point to the fact that it has experience of providing fixed services in the German market through the former Arcor and it can point to the success of its Vodafone One Net SME converged product in markets such as Italy and the Czech Republic.

• Orange/T-Mobile and 3 should consider developing fixed network services in the UK as a priority. Fixed services are a must have business and these operators risk falling further behind O2 and Vodafone in both the large enterprise and SME markets. O2 has joined operators such as BT Business, ntl:Telewest Business and now Vodafone who can claim to be complete solutions providers. Orange can highlight that it can provide up to 8 Mbps ADSL, but it is still significantly behind the majority of its competitors in terms of fixed services in the UK.

Recommended End User / Customer Actions

• O2 UK now represents a new option for both fixed and mobile offerings on a single bill. Clients should check carefully how O2 intends to deliver and support a strong fixed-line customer experience and some hiccups might occur along the way as the carrier enters a new area. The company is in a good position to service the needs of all kinds of businesses, from SME to national large enterprise and global MNCs through the Telefonica Multinational Solutions service denominator.

• O2 is a newcomer to the UK broadband market and customers should not be afraid to push it on aspects such as SLAs, contention ratios and fix-time guarantees. Large enterprises in particular should press O2 on its ability to support large scale fixed contracts in the UK.

• UK SMEs should now consider O2 as a serious choice for all fixed and mobile connectivity needs. The operator has a proven track record for delivering advanced solutions for large and small enterprises and its strength in the mobility arena is well proven. Customers should also push it for a timetable on the launch on products such as RAS and UC.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Business Telecom Services - Europe | More information
| Client access - Full report in Enterprise Mobility - Europe | More information

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