Centrica will piggyback on the Vodafone network to extend its One.Tel brand into the mobile phone market. The UK’s number one home services provider plans to attract existing prepaid mobile users by undercutting its nearest competitors by nearly 60%. Although Centrica made it big in the electricity market with the British Gas brand, the story may be different for One.Tel.
Centrica is expected to launch a mobile virtual network in partnership with Vodafone under One.Tel.
Centrica is reportedly planning to offer a mobile service in alliance with Vodafone under the One.Tel brand. The acquisition of One.Tel in July 2001 brought with it one million active customers and the largest indirect telecoms service in the UK.
The new service will resemble Virgin’s link up with T-Mobile, with Centrica expected to piggyback on Vodafone’s network. This will cut overheads, allowing Centrica to offer competitive prices. It will offer a monthly line rental for under GBP5, 60% cheaper than the nearest competitor. The company hopes to attract existing prepaid mobile phone customers who have not paid on a monthly basis because of the higher cost. Rising pay-as-you go tariffs should also help subscriptions.
Vodafone benefits from leasing wholesale capacity to derive revenues, while also reducing its exposure to lower-usage customers in the pre-paid market. This dual benefit of boosting revenues without damaging average revenue per user is highly appealing for the troubled telco.
Centrica wants to see its communication business, which posted an operating loss of GBP97 million at the end of 2001, breaking even by 2003. Centrica has learnt from Virgin Mobile, which acquired 1.6 million subscribers in just over two years and reported EBITDA of GBP3.4 million in Q2 2002. Centrica has done it in the electricity market, with over five million electricity customers under its British Gas brand, and will now be hoping to duplicate its success with One.Tel.
With over 40 million customers for electricity, gas, home services, financial services and roadside recovery, it seems that Centrica can only see its customer base grow from a mobile offering.
However, the success of the electricity offering was strongly associated to the British Gas brand; One.Tel may struggle to compete in the already saturated mobile market. Its success will be dependent on Centrica’s marketing muscle.
Related research: Datamonitor, Stretching the Brand (DMEN0180)
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