Dixons jeopardises BT’s lead

Despite a decade and a half having passed since the privatisation of British Telecom and the opening up of the UK’s telephone equipment market to other suppliers, a new report says that BT is still in pole position in British households, with four out of five having a BT-supplied phone.

But BT’s stranglehold over the equipment market is in jeopardy, with the number of households using non-BT supplied phones doubling in the past two years. And the report – Mintel’s Telecommunications Retailing – adds that as loyalty to BT is concentrated among older householders and AB social groups, “it appears to be doing less well among younger groups, in particular the under-24s… Post-deregulation generations will have less affinity with BT, unless it can update its image to compete with store chains which project a younger, more go-ahead image”.

BT may still maintain its pos-ition inside consumers’ homes, but most new telephones are bought from one of the Dixons Stores Group’s strategically targeted retail formats – Dixons, Currys and The Link. Nearly 18 per cent of Mintel’s respondents had bought telephone equipment from a Dixons-owned store, and the three chains have a significantly younger customer profile than BT.

Telecoms equipment has also become an important market for high street catalogue retailers such as Argos and Index, suggesting that most people do not need a high level of customer service and technical back-up when purchasing ordinary phones.

The penetration of phones in UK households stood at 96.6 per cent in BMRB’s latest annual survey, a 2.3 per cent increase since 1995. Further growth is likely during 1998, following BT’s launch of its Residential Restricted Service Scheme, marketed as “In Contact”. This service is targeted at low-income households, with low sign-up fees and line rentals. Households cannot make outgoing calls (with the exception of emergencies) and BT expects about 300,000 customers to join within the first 18 months.

In 1998, 82.2 per cent of UK homes had a BT line, with 15.1 per cent using Mercury or a cable company. Comparing those figures with the 96.6 per cent mentioned above, who told BMRB they had at least one phone in the house, suggests either that some householders have a line but no telephone (not impossible, since some lines may be linked to computers or faxes) or – more likely – that some lease telephone lines from two or more suppliers.

Multiple ownership of telephones is growing rapidly, with less than a third of UK homes now having just one phone and just under a quarter having three or more phones. Answerphone ownership has increased from 23 per cent to 35 per cent over the past three years, with combined telephone/answer machines or fax/phone/answer machines becoming more popular than standalone models.

The percentage of households with a home fax machine, while still small, has grown significantly over the same period, from 3.3 per cent to 5.7 per cent, not counting those homes which are equipped with a PC capable of sending and receiving faxes.

The most common reason for buying new fixed (as opposed to mobile) telephone equipment for the home was to take advantage of new features such as caller line identification or services such as Mercury, where subscribers need a phone with a Mercury button on it.

Many owners of cordless phones have also upgraded recently to take advantage of newer models offering greater call clarity.

Another driver of new phone sales is greater demand for coloured phones – with trends mirroring those seen in the houseware market – and for novelty phones.

Despite the rapid growth of specialist mobile phone shops, the retail telephone equipment market is still dominated by BT shops, the electrical multiples and catalogue showroom retailers.

Mintel suggests that despite the spectacular performance of the specialist mobile phone shops in their target market over the past decade, they will need to change in the near future to take account of the convergence of mobile and fixed technology.

Mintel also points out that if the market follows the pattern seen in the video rental market, the country’s 3,000 independent mobile phone shops are likely to be threatened by the spread of retail chains.

Today, some 1,000 outlets operate as part of one chain or another, with Carphone Warehouse owning 178 stores and DX Communications 130. Network operators have opened their own outlets: Vodafone has over 250 stores and Cellnet a strong presence through BT’s recently relaunched outlets. Orange, a late entry to the market, runs 55 shops.

A further threat to independent mobile phone shops comes from the entry of retailers such as Asda and Tesco into the mobile phone market. These late entrants offer pre-paid packages at prices that no independent retailer can hope to compete with. Mintel’s report questions whether the mobile phone network operators “really care about the independent dealer any more”.

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