O2 UK, the British subsidiary of Spanish Telecom giant Telefonica (TEF), has officially commenced the roll-out of its fixed-line voice services to residential customers in the UK. The carrier, which was once the wireless arm of BT Group (BT), has finally stepped into the residential wireline voice market, consolidating its position as a full fixed-line service provider (offering landline voice and broadband Internet).
BT Group (formerly British Telecom) is the incumbent fixed-line telephone service provider in the UK. By entering the residential wireline voice market, O2 UK now competes head-to-head with its former parent company BT Group.
O2 UK, which currently markets fixed voice services to business customers, will offer two economical wireline voice packages for residential customers, namely, “Evening and Weekend” and “Anytime.” The Evening and Weekend plan offers unlimited calls to UK homes on evenings and weekends while Anytime offers unlimited calling facility to UK homes and 20 other countries. The wireline voice service is available in a dual-play (fixed-line telephony plus broadband Internet) bundled package.
O2 UK, which currently commands a roughly 28% share of the UK wireless market, is struggling with declining revenues as it faces intense competition. Additionally, termination rate (fees operators charge each other to connect calls) cuts enforced by regulators have tightened the carrier’s wireless revenue per user. Moreover, O2 UK has lost its exclusive marketing rights to the iPhone in the UK with rivals Vodafone (VOD) and France Telecom’s (FTE) Orange UK selling the device.
Competition in the UK wireless space has intensified with the recent merger of Deutsche Telekom’s (DT) British subsidiary T-mobile UK and Orange UK. The combined entity has dethroned O2 UK as the largest wireless operator in the UK with a roughly 37% market share and a cumulative subscriber base of approximately 28.4 million.
Given the highly matured UK wireless market, O2 UK is exploring fresh opportunities to strengthen its presence in the residential telecom market. The carrier is banking heavily on converged wireline services 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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