O₂ is the customer brand name of Telefonica UK Limited, provider of the second biggest mobile phone network in the UK (the biggest provider is EE, a subsidiary of BT plc). Originally a spin-off joint venture between BT and Cellnet in the UK, the company is now a wholly-owned subsidiary of the Spanish global telecommunications giant Telefonica. As well as providing mobile communications services direct to end-users through the O₂ network of retail outlets that can be found widely in shopping malls and high streets, O₂ provides the physical network through which several well-known mobile virtual network operators, such as giffgaff, Sky Mobile, Lyca Mobile and Tesco Mobile, offer their services. Along with the other major mobile network operators, 2019 saw O₂ rolling out the next, fifth generation of mobile phone network, known simply as 5G. This new technology promised far greater data speeds than 4G, providing customers with enhanced convenience, improved entertainment and amazing new services. But 5G also required massive investment from the network providers such as O₂, and the question for the industry was whether that investment would generate a good economic return.

In a competitive marketplace like the UK, where there is a wide choice of mobile phone providers (those who sign customers up to a service rather than the company that owns the network) and where overall market growth is slow, acquiring customers becomes more difficult for providers. Churn rates that were sources of inconvenience to providers in the early days of mobile communications have become much more pressing. This is doubly so when one calculates the costs of providing increasingly feature-laden smartphones, with no guarantee that customers will stay beyond the contract tie-in period. Like the other operators, O2 has put great efforts into managing its relationships with end-customers in order to improve this situation.

QUESTIONS

1. What variables would you use to analyse O₂’s independent sales channels?
2. What relationship clusters would you identify and how would you manage each to achieve a balanced portfolio for O₂?
3. How might the life-cycle concept be used effectively by O₂ in its portfolio management?