Triple and Quad play services push Three towards O2 purchase

Triple and Quad play services push Three towards O2 purchase

Business news |
By eeNews Europe

A key trend in the market is triple and quad play services pushing mobile operators to be able to offer more beyond just mobile, such as fixed line, TV and broadband. From a business model point-of-view, the multi-play approach makes it easier to attain and retain customers as well as increase ARPU.

With LTE, an all IP approach, his trend makes sense in terms of consolidation of network costs as many different services can be turned into data packets and sent over the same infrastructure. Further, legacy networks will become irrelevant.

Telefónica has been looking to sell O2 to reduce its high debt levels and to enable it to continue its focus on other core markets where it has a better footprint. On its own, O2 faces decline as competitors like BT ensure they cover all the bases for quad play services: fixed telecom, TV, broadband and mobile.

Greater reach, but what of the services themselves? According to Mark Windle, Head of Marketing, OpenCloud:

“Mergers such as this, and BT’s acquisition of EE, show how traditional telecoms operators are seeking out opportunities to horizontally integrate access networks. In the broader sense it is mobile, fixed-line, Wi-Fi all coming together to offer complete and cost-effective connectivity packages. We’ve seen BT, EE and Sky all announce plans for quad-play offerings, delivering mobile, broadband and television to their customers. Hutchison Whampoa’s purchase of O2 continues the trend of partnerships, mergers and acquisitions.

“Such integration of access networks provides a key opportunity to accelerate the decoupling of their service and access divisions. In doing this, operators will be able to deliver any communication service over cellular, IP or Wi-Fi, based on a customers’ preference. The separation will allow them to focus on service innovation, similar to competing OTT service providers.”

In the end most MNOs (mobile network operators) have already made the move beyond just mobile, but there are still some loose ends that are being consolidated. The potential acquisition of O2 is just one more operator fine tuning their businesses. Today, MNOs are in the process of strengthening their presence where they have a strong hand and exiting the weak plays, further, they are tuning their relationships with their customers.

Cloud computing and virtualisation are driving network costs down and increasing flexibility, enabling different business models to be implemented. For the consumer, that should imply more services at a lower cost, and a more responsive relationship with the service provider. According to Jennifer Kyriakakis, Founder and VP Marketing, MATRIXX Software:

“The term Digital Service Provider applies to the next generation of mobile service providers, organisations that have moved on from offering core telecommunication services, voice and SMS, to providing mobile broadband access, services, apps – all sold directly from the device.

“The DSP isn’t merely a dumb pipe offering shared access to a common utility; it is an online, real-time business that deals with countless transactions every day, managing high volumes of data traffic and multiple devices per user, and often multiple users per account. The mobile landscape has changed dramatically and CSPs (Communications Service Providers) are fine-tuning their businesses, and their network infrastructure, to cater for the digital needs of the data-hungry customer.

“This is an interesting time for the industry and we will see more and more CSPs make the leap from being network-centric organisations to becoming customer-centric businesses in the DSP mould. This is an ideological shift, a new phase of evolution that is being driven by innovations in IT, bolstered by new operational models such as cloud and virtualisation that are enabling operators to reduce costs, become more agile and adapt to changing market conditions.”

The purchase of O2 is for an indicative price in cash of £9.25 billion which would be paid at closing, and deferred upside interest sharing payments of up to a further £1 billion in the aggregate payable after the cumulative cash flow of the combined businesses of Hutchison 3G UK Limited and O2 UK has reached an agreed threshold.

The transaction remains subject to satisfactory due diligence over O2 UK, agreement on terms and signing of definitive agreements, and obtaining required corporate and regulatory approvals. The negotiations may or may not result in any transaction.

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