Carrie Pawsey
Tesco Telecoms reaches 1m customers
UK supermarket retailer Tesco has announced that it now has 1m customers in its telecoms business. Tesco began offering fixed and mobile services in September 2003 and added Broadband in August 2004. The fixed services are a CPS service using Cable & Wireless network, the Broadband service is via NTL, and the mobile business is a 50/50 JV with O2. Comment: The telecoms business is showing strong growth to have achieved 1 million customers in 19 months. Although Tesco has declined to give a subscriber breakdown by product, we know that the mobile division has performed particularly well. Tesco announced at the end of 2004 that it had 500k mobile customers and we believe most of the current 1m customers are mobile subscribers. This shows the huge distribution power of Tesco for its mobile services and its key strength as an MVNO partner for O2. Initially, the prepaid package with a handset was sold in 500 stores but this is rapidly increasing and appears to have had an impact on sales. Tesco also introduced a SIM-only package that it is selling in its smaller Tesco Express stores. We don't expect that Tesco will only want to play in the prepaid segment. There could be some resistance from O2 when Tesco wants to launch a postpaid mobile service - after all, O2 doesn't want to cannibalise its own customer base. However, O2 won't want Tesco to take its business elsewhere, particularly as it seems Tesco Mobile might achieve its target of 2m customers by 2008 earlier than planned.
