Competition hits O2's service revenue

Third-quarter performance indicators released yesterday by mobile operator O2 signalled that competition in the Irish mobile market is intensifying.

O2 reported a decline in service-related revenue of 1.7 per cent, hit by a 2 per cent cut in mobile termination rates and by deepening price competition. Monthly average revenue per user (ARPU) declined to €45 from €46 in the second-quarter and from €47 in the same period last year.

The company increased its post-paid customer base by 16,000. However, it lost 12,000 pre-paid customers in the face of tough competition from Meteor, which yesterday revealed it has won 750,000 customers. Meteor announced that its customer base has increased by 50 per cent in the past year and its market share by 16 per cent.

The drop in O2's pre-paid customer numbers for the third quarter in a row came despite promotional efforts, including a one cent weekend offer on text messages and on telephone calls between O2 customers. That offer is being extended until February.

O2 chief financial officer Paul Whelan noted that initiatives such as the one cent promotion helped boost average monthly minutes to 247, up from 237 in the second quarter and a 9 per cent increase on the same period last year. The Irish love affair with texting continues, with 397 million text messages sent during the quarter.

"We are very pleased in relation to contract," Mr Whelan said. "We have added about 16,000 post-paid customers quarter-on-quarter and 46,000 year-on-year. Numbers are increasing every quarter on the back of a clear strategy."

That strategy has included new tariff incentives and service offerings including a "swap-out" programme giving customers an immediate replacement handset if their phone is faulty and within its warranty period.

Given the level of competition between O2, Meteor, 3 and Vodafone, customer loyalty will continue to be a strong theme, Mr Whelan said.