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Friday, February 02, 2007

Oranges are not the only Loons

My cyberbuddy, James Enck over at Eurotelcoblog, has been following the same calls as me. The difference is that last night I gave up on the deadly dull France Telecom call as not only was listening giving me a migrane but any rare half-decent question was the dealt with the perfect forward defensive - “we will reveal that on March 6th”. At least with Voda, they have the decency of giving out enough information to allow a couple of hours of spreadsheet gaming to break the tedium. Of course as an Opensourcer, the great advantage I have over James is that I can give up and leave it to someone else.

As with James I was struck with the appalling Orange net adds and my thoughts wandered to the Carphone twofor prepaid Christmas offers – they obviously didn’t sell a lot - net. Even more noticeable was the T-Mobile UK net adds which I think included Virgin Mobile figures on the prepaid side and were also noticeably extremely light. Seeing that Carphone reported huge prepaid sales figures, the only answers to this interesting conundrum are the dreaded churn or even worse box breaking. The new Virgin Media call will be interesting on the mobile side.

On the Orange postpaid side, I plan on opening a book on how long it will be before the mobile operators to realize that bundling of fixed and mobile products for the consumer market is a really stupid idea that only consultants are interested in. Average Joe Public is only interested in cheap calls on the mobile, they would prefer to pay less without having their fixed line or broadband line added to the bill. In fact, Joe Public would love to ditch the fixed line if the mobile was cheap enough and just use the fixed line for broadband.

I also spent a while looking at graphs of the sterling/euro exchange rates and wondering how much the Orange revenues actually dropped in Sterling. Given all the above, unless Orange dream up a new strategy fast, I think their only function in 2007 will be to increase the size of Charles Dunstone’s Wallet.

I was intrigued by the Sky call and although the strategy is proving to be really expensive, I still think it is the right one. I didn’t like the jokes about Virgin Media but couldn’t resist a little chortle about "... there is more to the business than throwing someone out of a plane with a wedding dress on." I don’t think the real competitor is Virgin Media which to be honest should be so easy to beat that it will look like Sky is playing the role of bully. I think the real competition is the BBC and BT which are much more difficult beasts to best.

Here are four examples where Sky is playing an extremely smart game and beating the rest hands down:
  • Sky+ - this is a killer product when tied with the vast bandwidth Sky have and it is already in 2 million homes. BT Vision is a good start to compete but Sky are so far ahead they may be unbeatable. The addition of Sky Anytime functionality and pricing strategy is pure genius. When Sky links the Sky router to the Sky+ box - it is game over. Forget the joke iPlayer, BT Vision and whatever Virgin Media will end up calling its box . Sky already has captured the high roller market - the rest are fighting over scraps.
  • MobileTV – on the call Murdoch revealed 230k paying subs as a throw away comment. No-one in the press has picked up on this preferring instead to report the disastrous Virgin/BT Lobster product. By the time the L band is auctioned Sky will have enough customers to make it economical, although with some of the comments about future investment strategy they may need a partner with deep pockets to roll out the infrastructure.
  • Environment – I think James’s comment about this is spot on. I also think the strategy is very hard to replicate. Can you imagine how much it would cost BT to go carbon neutral? – they must power 30 million fixed line phones in the UK alone. The BBC who in typical fashion are very good at lecturing the British Public how shameful they are in destroying the environment yet does nothing themselves about it - Jeremy Paxman has taken up the case. The idea of giving out a couple of light-bulbs on each engineers visit is not only a killer approach, but is dirt cheap and shows intellectual dexterity.
  • Email - I'm going to discuss this in another post but the deal with Google is also pure genius and will have the other ISPs scratching their heads and wondering why they have been haemorraging cash on email services for so long.
We live in interesting times.