Convergence again became the buzzword in major European operators’ recent earnings statements, but as the likes of Orange and Deutsche Telekom hail rapid multiplay growth, the UK’s incumbent BT is still discussing it as a largely untapped opportunity.
There is no doubt offering packages with two or more services has proved popular in other major European markets and the UK’s principals are well aware of this. Parents of O2 UK and Vodafone UK are both heavily involved in other markets, and this week BT – somewhat belatedly – unveiled solid plans to drive the market with a new convergence strategy.
At the event BT Consumer CEO Marc Allera said its convergence strategy would “change the face of the UK market.” However, meeting its lofty aims seems distant from the UK’s current position.
According to estimates from Analysys Mason, the percentage of UK fixed broadband contracts which included a mobile SIM stood at just under 12 per cent by the end of 2017. This compared to 75 per cent in Spain, 51 per cent in France, 49 per cent in Portugal and 28 per cent in the Netherlands.
Only Germany fared worse of the major Western European markets and, should Vodafone’s bid for Liberty’s cable and TV assets in Germany, Hungary, Romania and the Czech Republic go through, the whole shape of that market could rapidly change.
IDC estimates the number of UK consumers taking quad-play packages – including TV – by the end of 2017 paints a similar picture of a fragmented market, with just over 3 per cent taking four services. This compares to a Western European market average of 7 per cent and was well below France (27 per cent), Spain (14 per cent); and even Germany (5 per cent) despite its low fixed-mobile convergence rate.
Despite claims made by BT Consumer on its potential, Analysys Mason research director Rupert Wood told Mobile World Live (MWL) a successful converged market needs at least two players with their own fixed and mobile infrastructure. Without this element, there is no need for operators to offer discounts and, as a result, little compelling case for consumer uptake.
“Fixed and MVNO or mobile and bitstream [wholesale fixed access] don’t seem to work as growth models, only for retention,” he added. “Without discounts or freebies, the value proposition of fixed-mobile convergence is unclear and organic growth is limited.”
“The UK market has, as yet, still only one fully integrated player – BT – and it has done little so far in terms of consumer propositions,” Wood noted. “With Marc Allera in place as head of consumer, it has placed some emphasis on fixed-mobile convergence in its strategy update – so let’s see – but until there’s a player with broadly equivalent scope and reach, the incentive may not be great.”
CCS Insight’s VP of multiplay and media Paolo Pescatore said the UK currently lagged European counterparts for a number of reasons including “more converged providers in the rest of Europe, greater consumer appetite to sign up with more services from their provider and more importantly to have one bill.”
While IHS Markit senior analyst James Joiner agreed the UK market was in a fragmented state, he was confident consumers would recognise the benefits of convergence.
“Once they are on these plans, other benefits become apparent to customers such as single billing, single point of contact for customer services, and these customers are much less likely to churn than single-play customers,” he noted.
A risky play?
IDC associate VP for European Mobility John Delaney added although there are no solid statistics on consumer demand for these services in the UK, “it’s pretty clear from the Spanish and French numbers, when operators promote attractive quad-play bundles, they find an enthusiastic market for them.”
He agreed lack of competition had provided a stumbling block in the UK, but noted the strategy “needs some care” as multiplay was effective for acquisition but when it came to customer retention often the revenue from each individual service was diluted.
Ovum practice leader for Europe Dario Talmesio agreed convergence came with risks, telling MWL: “The UK is considerably behind many other European countries when it comes to convergence, but so far convergence in Europe has been fairly simplistic, based on discounts of products purchased as a bundle.
“Too often we have seen bundles that offer value destruction rather than value creation. The challenge is to do convergence in a way that delivers something new, adding value,” he added.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.