O2 UK, the British subsidiary of Spanish Telecom giant Telefonica (TEF), recently announced that it will offer fixed-line voice services to residential customers in the UK starting March 2010. The mobile carrier, which was once the wireless arm of BT Group (BT), aims at complementing its existing wireless and broadband Internet services with wireline voice.
 
BT Group (formerly British Telecom) is the incumbent fixed-line telephone service provider in the UK. By entering the residential wireline telephony market, O2 UK will compete with its former parent company BT.
 
O2 UK, which currently markets fixed voice services to business customers, will offer two wireline voice packages for residential customers, namely, “Evening and Weekend” and “Anytime”. At a monthly cost of $15.45, the Evening and Weekend plan offers unlimited calls to UK homes on evenings and weekends. The Anytime plan offers unlimited calling facility to UK homes and 20 other countries for just over $20 per month. Existing wireless customers can bundle these plans for $28 a month.   
 
O2 UK currently leads the British wireless market with roughly 28% share. However, the entity continues to struggle with declining revenues as the operator faces intense competition, especially from its biggest rival Vodafone (VOD). Additionally, termination rate (fees operators charge each other to connect calls) cuts enforced by regulators have tightened wireless revenue per user.
 
The competitive scenario in the UK wireless space is set to intensify in the near future with the merger of Deutsche Telekom’s (DT) British subsidiary T-mobile UK and France Telecom’s (FTE) Orange UK. The combined entity would dethrone O2 UK as the largest wireless operator in the country with roughly 37% market share and a cumulative subscriber base of approximately 28.4 million.    
 
Given the highly mature UK wireless market, O2 UK is exploring fresh opportunities to strengthen its presence in the residential telecom market. The carrier will offer converged services (bundling wireline telephone with wireless and Internet) in a bid to win market share. Moreover, fixed-line voice is expected to help O2 UK boost its wireline broadband business and achieve the target of 1 million broadband subscribers by 2010.
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