O2 customers more loyal despite weaker mobile network

27 July 2017, 12:33   By Samantha Smith

O2 have the most loyal customers of all major mobile operators, with the provider's latest financial results revealing a low churn rate of 0.9%.

o2 store front splash
Credit: chrisdorney/Shutterstock.com

This puts them ahead of such big rivals as EE, Vodafone and Three, whose ability to retain their customers isn't quite as impressive as O2's.

What's particularly impressive is that O2 have been able to keep more of their existing customers happy despite the fact that a new RootMetrics survey has put them yet again at the bottom of all four major networks for overall performance.

And if nothing else, this shows that customer satisfaction isn't simply about delivering the best product.

Churn rates

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Aside from boasting a churn rate of only 0.9%, O2 also celebrated the addition of 178,000 new contract customers in the 12 months leading to June 30th.

To put this in some perspective, Three UK added 252,000 new contract customers over the entire course of 2016, although their loss of 29,000 prepaid customers means that their net additions amounted to 213,000.

This is still higher than O2's annual figure, and would suggest that O2's claim of offering the best customer service is somewhat questionable, yet a different picture emerges when the providers two churn rates are placed side by side.

While O2's is 0.9%, Three UK's most recent churn figure was 1.4%, indicating that O2 have a slightly better ability to hang onto customers once they've acquired them.

This indication becomes stronger when O2's churn rate is compared to Vodafone's and EE's.

For example, while EE haven't published their own financial results since being acquired by BT in January 2016, BT Group do publish the churn rate for their mobile operations as a whole (comprising EE and BT Mobile), with their current rate standing at 2.1% for the year ending on March 31st.

Once again, O2 prove their ability to keep their customers happier, yet Vodafone's churn rate is most likely even higher than EE/BT's.

While Vodafone didn't explicitly state their specific rate in their latest results, they did admit to a 3.3% decline in mobile service revenue in the 12 months to March, which they said was a "result of higher churn".

And given that they suffered a number of customer service mishaps over the course of 2016 - including a £4.6 million fine for billing errors and complaints mishandling - it is very plausible to conclude that their present churn is higher than 2.1%, and perhaps significantly higher.

In fact, for a quarterly result published in June 2016, they declared their churn rate at 15.5%, so even though they've introduced a number of customer service improvements since then, it's likely to be still be relatively high.

It's not network performance

Of course, pointing out O2's superior churn rate is one thing, yet it's another to explain just what keeps their customers so seemingly satisfied.

Surprisingly, it can't be their network's technical performance, since as with their previous survey, the latest report from telecoms analysts RootMetrics put O2 bottom for "overall performance", with EE coming out on top yet again.

RootMetrics H1 2017

Source: RootMetrics, UK Mobile Performance H1 2017

More surprisingly still, O2 came last in every single category - including speed, reliability, data, text, and call performance.

Offers and Innovation

While it's hard to give a definitive answer as to how O2 can hold onto customers when they seem to be providing an inferior product, it must obviously come down to the one remaining factor: customer service.

As they themselves say, it "might be down to the £15 million that our customers have saved so far this year with Priority", which grants customers special offers and discounts on a variety of products, events and nights out, as well the ability to buy concert tickets before they go on sale to the general public.

Added to that, O2 also claim that O2 Refresh has something to do with their customers' loyalty. This is a scheme which allows customers to split their bill into two parts, one for their handsets and one for their call, text and data plans.

According to O2, this makes it more affordable for customers to upgrade to a new phone, saving each "O2 Refresh customer an average of £216 per year".

So in other words, even though O2 don't actually provide the fastest or most reliable network, they provide innovative customer service and give their users the chance to save non-insignificant amounts of money.

And in light of how their churn rate is only 0.9%, this must be at least as important to their customers as the very thing - a mobile service - they originally set out to buy.

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