O2 restricts upgrade of mobiles

Independent phone retailers have complained of difficulties securing pre-paid mobile phones from O2 for customers who wish to upgrade their handsets.

A number of independent phone retailers contacted by The Irish Timesconfirmed that they have had limited or no stock of Speakeasy upgrade phones since last May.

The quotas put in place by the Republic's second largest mobile phone operator, which is part of the Spanish Telefónica group are seen by retailers as an effort by the group to cut costs given that growth in the mobile phone market has stalled.

An O2 spokeswoman said it had "redirected some investment in the business into value-based propositions" such as reduced tariff offers and providing additional call credit for online top-ups.

"As a result of this redirected investment there has been a minimal reduction in the volume of Speakeasy upgrade packs in the supply chain at present, however, we have not stopped the supply of these packs," O2 said in a statement.

"We have had no complaints from our customers regarding availability of handsets," it continued.

O2 supplies its pre-pay phones in both an upgrade version, with no sim card, and as a new customer version, with a sim card included in the box. Retailers have not reported any shortages of the pre-pay phones for new customers.

O2 agents say they are annoyed that the plan to reduce supply was not communicated to them in advance. They also claim that larger chains and O2's own stores are not as heavily impacted.

Some retailers have suggested that the policy is forcing a number of customers to buy new phones with new sim cards.

But both O2 Ireland and analysts have ruled out any suggestion that such a policy could be an attempt to inflate customer figures. Mobile operators report net customer numbers on a quarterly basis so each new sim card activated would be negated by the lack of activity on the old sim.

The sim card attached to a phone is no longer considered to be active if there has been no billable activity on it for 90 days.

O2 operates 60 of its own shops around the country and has another 350 independent outlets who sell phones to use on its network.

The country's largest mobile operator Vodafone has just a single version of each phone it offers on a pre-pay basis as the sim cards are not boxed with the phones.

Darragh Stokes, managing director of telecoms consultancy Hardiman Telecommunications, said that by limiting phone supply an operator is likely to be seeking to manage its costs more efficiently.

He said that the handset subsidies provided by operators in Europe, which reduce the purchase price of handsets, are much higher than in other parts of the world.

"If they are trying to control their overall subsidy cap it makes sense to direct their subsidies towards the outlets where they will get a better return on it," he said.

"There is an overall trend in the industry to focus on cash management and cost reduction through things like network management outsourcing and allocating handset subsidies to where they can get the best return."

O2 is currently engaged in a process to outsource its technology development and network management to a third party which could see 450 employees transfer employer.