Monday, May 09, 2005


Another uncomfortable reminder for telcos of the power of the consumer comes today from UK gas retailer/domestic multi-service provider Centrica. In the first four months of the year, customer loss in its residential business (gas and electricity) was up 15% on an annualized basis (last year the company lost 1m households). This segment of the business contributed 62% of group EBIT last year, so obviously no one's terribly happy with the situation. Key differences to EuroTelco:

  1. Centrica doesn't own its infrastructure, but is one of a number of service providers on NationalGrid/Transco (i.e., must trade entirely on the strength of its own brand, service reputation and financial resources, rather than on the legacy benefits of an inherited hegemony in access).
  2. Gas is a finite and tangible commodity, and even though it may lose more customers as a result, Centrica is in a position to raise prices on defensible grounds.
  3. The company does telecom too, though it only contributes c.2% of group EBIT. Then again, how many EuroTelcos can you name which derive 2% of EBIT from something entirely outside their legacy core?

It would be interesting to see the performance of EuroTelco retail service provider businesses if forced to compete on the same basis. Maybe the Amsterdam fiber project will provide us with such a demonstration in the foreseeable future.

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