Three is carving into O2’s customer base, taking four O2 customers for every one it loses, according to Three CFO Richard Woodward.
The operator is on a major drive to double its customer base from around 5.5 million to 10 million in four years, driving growth via its data proposition.
Woodward said number porting figures show Three is growing its customer base at the expense of all the other networks, with O2 bearing the brunt. He claimed that on average the network is porting two customers from other operators onto its network for each one that leaves.
In response, an O2 spokesperson said: ‘Overall, we have consistently had the lowest churn in the industry for the last eight quarters, which can be attributed to the highest customer satisfaction in the industry, as highlighted by Ofcom’s complaints report last week.’ Three received the most complaints in Q2 2011 and O2 the lowest.
Three CEO David Dyson said customer growth is being driven by Three’s The One Plan. He said: ‘The One Plan tariff has been incredibly successful. The reason it is such a success is not that people want to use a huge amount of data, but because it provides them with a level of surety and confidence that they won’t run up a big bill.’
Now Three is planning to bolster the offering by adding further tariffs to the plan that currently provides customers with a bundled voice and text deal, along with unlimited data for £25 per month on contract and £15 on pay-as-you-go.
The new tariffs will sit alongside the existing Talk and Text Plans, but customers can choose to pay £3 more per month to have all you can eat data. The cheapest of these offers, which includes a handset, starts at £18.
Three’s data growth has rocketed over the last year with the rise of smartphones. Woodward said: ‘Getting the iPhone last July was critical. Since then growth has been phenomenal. Our contract handset sales are going faster than ever before.’
Dyson said that 98% of Three’s sales are for smartphones. According to analyst Enders, 44% of all data traffic in the UK is carried on Three’s network, with the other three operators handling the remaining 56%.
Woodward said that Three had worked hard to lower the operational cost of its network and reduce the company’s selling costs.‘We have reduced network operational costs by 33% thanks to lower transmission costs and reductions in site rental through the MBNL network sharing deal with T-Mobile.’
Woodward said that Three’s goal is to lower its subscriber acquisition costs and gain better quality customers. In 2006, 90% of Three’s sales came through third parties. Now nearly 90% come through Three’s direct channels where costs are 40% lower than going through a third party and having to pay them commission. ‘You cannot grow rapidly if you are paying that size of third party cost,’ he said.
Dyson said he was not worried that Three’s expansion would compromise its finances. ‘The One Plan is quite an aggressive proposition, but we are confident we can make money out of it. Our operational costs are relatively fixed, so more data going through won’t affect that. What does vary is capital expenditure.’
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