Contents

Chapter 1 – Introduction

Chapter 2 – Summary

Chapter 3 – Main findings

Chapter 4 - Switching mobile networks and number portability

Chapter 5 – Satisfaction with mobile telecoms service

Chapter 6 – Reducing the costs of calling mobiles

Chapter 7 – Network comparisons

Annex 1 – Q10 business questions on mobile telephony

Chapter 1

Introduction

1.1 This report provides an overview of the key findings of business behaviour in the mobile telecoms market, taken from the tenth wave of Oftel’s quarterly business survey, conducted in August 2002 amongst 831 UK businesses. The results are subject to an error margin of about 2-4%, this is slightly higher amongst smaller subgroups. Results referred to as 'significantly' different, have been tested at the 95% level of confidence, please see footnote for further sample details.

1.2 Quotas and weighting were applied to small and medium businesses separately so that the sample was representative of SMEs (Small and Medium Enterprises) in the UK in terms of business size, industry sector and region.

1.3 In some cases throughout the report, data on a rolling basis is shown. This combining of two periods increases the sample size and allows trends in the data to be analysed and interpreted with greater confidence. For example, where identical questions have been asked over the past two waves (May and August 2002), combined data have been used.

1.4 The survey was conducted on behalf of Oftel by Continental Research during August 2002. This report has been prepared by Continental Research based on the results of the survey (footnote 2).

1.5 The report covers:

• number of mobiles used;
• mobile telecoms spend and packages used;
• switching network and number portability;
• satisfaction with mobile service;
• reducing the costs of calling mobiles;
• network comparisons;

1.6 A copy of the questions is attached in Annex 1. Topics to be researched each quarter are requested by Oftel project teams, and results feed into current investigations and reviews in individual market areas.

Footnotes

Footnote 1: The survey was conducted amongst a representative sample of small and medium enterprises (SMEs) in the UK, reflecting the UK profile in terms of business size, sector and region. As small businesses (1-50 employees) make up around 97% of businesses in the UK, medium businesses (51-250 employees) were over-sampled in the survey to produce a sufficiently robust sample to allow analysis of the results among medium businesses. The combined results were re-weighted to be representative of UK SMEs as a whole (97% small businesses; 3% medium businesses), consequently the results for small businesses closely resemble those for SMEs as a whole. The error margin for this survey of 831 businesses is about 2-4%, but is higher amongst small subgroups. Results referred to as 'significantly' different, have been tested at the 95% level of confidence and hence are outside of the error margins and therefore can be considered real changes. All data shown is weighted data. Unweighted base sizes are shown on charts and tables to show the number of businesses who were asked the question.

Footnote 2: The report should not be seen as recommended best buys and should not therefore be relied upon when making purchase decisions. Oftel has conducted its own checks on the data in this report and whilst we consider it to be correct, Oftel accepts no liability in respect of any of the results provided to it by Continental or any decisions taken by any person in reliance on the report.

Chapter 2

Summary findings

Headline figures

• 61% of all businesses have a mobile phone
• £149 spent on mobile services per month by small businesses with mobiles
• £1,395 spent on mobile services per month by medium businesses with mobiles
• £16 per month spent on mobile services per employee amongst all SMEs with mobiles
• 89% satisfied with overall mobile service

Mobile ownership has remained around 60% over the last year

2.1 61% of businesses currently own at least one mobile phone. This is an increase from 57% in May 2002, but is in line with figures over the last year.

Number of mobile phones per business stabilises

2.2 Small businesses currently own an average 4 mobile phones and medium sized businesses own an average 19. These figures have remained broadly similar since February 2002. This stability comes after the number of mobiles per business increased from May 2001 through to February 2002.

UK SME average monthly spend stabilises at around £200

2.3 Small businesses are spending £149 per month on average for mobile telecoms services, and medium sized businesses are averaging £1,395 per month. Overall amongst UK SMEs average spend is £194 and has remained around £200 since August 2001, apart from a slight dip in November 2001 (£159).

Over a third of businesses have switched mobile networks

2.4 35% of businesses have switched mobile network/service provider. This is almost identical to the 34% having ever switched in May 2002, but is an increase on 29% in February 2002. 56% of those that switched since the introduction of mobile number portability (3 years ago) retained all their numbers compared to 69% of those that switched within the last 12 months indicating a significant improvement in use of number portability over time. When those who had never changed their mobile supplier were asked why they had never switched, 75% answered that they were satisfied in some respect with their current supplier or had no need to change.

Satisfaction with overall mobile service falls to 89%

2.5 Currently 89% of UK SMEs are satisfied with their overall mobile service – compared with 94% in both February and May 2002. This drop in overall satisfaction appears to be driven by a fall in satisfaction with the various cost aspects of mobile services which all fell between May and August 2002. Satisfaction with overall value for money fell from 86% in May 2002 to 77% in August 2002. This fall in satisfaction with mobile costs is concentrated amongst small businesses.

20% of businesses have taken steps to reduce in house calling to their mobiles

2.6 20% of businesses with mobiles claim to have taken steps to reduce the cost of in house calling to their mobiles. (This compares with 22% in February 2002) These steps include 9% claiming to use mobile to mobile adaptions, and 8% claiming to use leased lines.

Many businesses are trying to reduce the costs to customers calling their mobiles

2.7 70% of businesses with mobiles claim they try to reduce the cost to their customers calling the business on its mobile numbers. This is an increase on 64% in February 2002.

2.8 47% claim they keep the call short if a customer calls their mobile number, 27% claim to have chosen the mobile network that is cheapest for customers to call. 25% say they call customers back. 18% claim to have a freephone or local rate number for calls to its mobile.

Areas where businesses perceive mobile operators differ most and least

2.9 The areas where businesses feel the networks most differ is in the range of packages and tariffs offered (74% overall feel that they differ), and geographic coverage (71% think that they differ). The areas with least difference between the networks are range of services offered (52% feel they differ) and quality of customer service/ aftersales care (49% believe they differ). 65% feel that the networks do differ in terms of overall value for money.

Chapter 3

Main findings

Business use of mobile telephony

Ownership of mobiles

3.1 Currently 61% of all UK businesses own at least one mobile phone. The latest figures show a recovery following a slight drop in May.

3.2 6% of companies without any mobile phones used to have mobiles connected to a network. The figures for small and medium companies are 6% and 1% respectively. The two main reasons given for stopping using mobile phones are that they are "not necessary/ just didn’t need them", and "line rental was too expensive".

Number of mobiles owned

3.3 On average UK small businesses with mobiles currently have 4 mobile phones while medium sized businesses with mobiles have 19, as shown in the table overleaf. This figure is unchanged since May 2002. It appears that the number of mobiles per business has stabilised in 2002 after increasing through 2001 from 2 mobiles per small business and 15 mobiles per medium sized business in May 2001. Spend per mobile is covered later in this section.

Figure 3b: Average number of mobile phones amongst UK SME businesses
Base: UK SME businesses with mobile phones

Use of service providers and mobile packages

3.4 Monthly contract (post-pay) packages remain most popular amongst businesses. Currently three-quarters (75%) of UK SMEs with mobiles are using a post-pay package. This figure is in line with recent periods.

3.5 Small businesses remain more likely to use pre-pay packages (21%) than medium sized businesses (9%).

Business spend on mobile telecoms

3.6 Average monthly spend amongst UK SMEs appears to have stabilised at around £200: average spend was £194 in May-August 2002. Small businesses are currently spending £149 per month on mobile services compared to an average £1,395 spent by medium sized businesses.

3.7 Most businesses actually spend less than these averages (58% spend up to £100 per month – shown in figure 3d) as they are inflated by a small number of higher spenders (6% spending more than £500 per month). In comparison, fixed monthly spend is currently £367 (£288 amongst small businesses and £3,086 amongst medium sized businesses).

Base: UK SME businesses with mobiles, May-August ‘02 (Base: 1155)

3.8 Spend varies according to the type of package used, those using pre-pay packages spend on average less than half as much per month (£79) as those using monthly contract packages (£211).

3.9 Figure 3e overleaf compares small and medium business average spend per phone. Medium businesses spend almost twice as much per mobile as small businesses - £72 and £37 respectively. Amongst medium businesses the average monthly spend per mobile fell from £91 in May ’01 and has remained stable at around £70 for the last four quarters.

3.10 Average spend per employee currently stands at £20 for small businesses and £12 for medium businesses. There has been very little change in these figures in recent quarters.

Figure 3e: Average monthly spend on mobile telecoms services per business, mobile and employee
Base: UK SME businesses with mobiles, (Base: 1155)

Chapter 4

Switching mobile networks and number portability

4.1 Over one third (35%) of all UK businesses with mobile phones have switched network. The previous rise observed in May has been sustained. 14% of businesses had switched network in the last 12 months and 21% switched over a year ago.

4.2 It is possible that the increases reported last quarter may be an indication of confusion amongst businesses in relation to switching network and the recent rebranding of O2 (formally BTCellnet) and T-mobile (formally One2One). We will continue to monitor consumers switching behaviour in subsequent quarters.

4.3 Medium sized businesses remain more likely to switch mobile network or service provider than small businesses (49% and 35% respectively).

4.4 Overall, the proportion of businesses retaining all their numbers when switching is 53%. 66% of medium sized businesses retained all of their numbers compared with 52% of small businesses.

4.5 Mobile number portability was introduced 3 years ago. 56% of those businesses who have switched since then retained all of their numbers. This figure rises amongst those businesses that switched more recently – 69% of businesses that switched mobile network or service provider within the last 12 months kept all their numbers.

Figure 4a: % UK SME businesses that kept numbers when switching networks
Base: UK SME businesses with mobiles that switched their supplier, May-Aug ’02 (Base: 493)

4.6 38% of those who switched since portability and changed number had in fact asked to retain their original numbers.

4.7 Figure 4b above, shows that the main reasons for not porting , were ‘new company said I had to have new numbers’ (15% of those not retaining all numbers) and ‘we wanted new numbers’ (13% of those not retaining all numbers).

Reasons for not changing mobile network/ service provider

4.8 All businesses who had never changed their mobile network/ service providers were asked why. The most common answers are shown in figure 4c. Responses are not mutually exclusive therefore do not total 100%.

4.9 Overall 75% of those who had never changed their mobile network/ service said it was because they were satisfied in some respect with their current supplier (satisfied with quality/service, satisfied with cost, already on best deal/network) or had no need to change (no need to change supplier, not interested in changing supplier).

4.10 7% of customers mentioned specific barriers to switching such as not able to change due to contract, would cost too much to switch, too difficult to work out which is cheaper/ better, don’t want to have to change numbers and not aware of choice of supplier in my area/ they are the only service provider in this area. The most frequently mentioned barrier to switching (that it would cost too much to switch) was only mentioned by 2% of those who had never switched their mobile network.

Chapter 5

Satisfaction with mobile telecoms service

5.1 Figure 5a shows businesses’ satisfaction with a range of aspects of mobile service. Overall satisfaction with mobile telecoms fell from 94% in May 2002 to 89% in August 2002. This drop in overall satisfaction appears to have been driven by a drop in satisfaction with value for money and cost to others of calling a mobile among small businesses. - This is similar to the 88% overall satisfaction during November 2001. Overall satisfaction levels for small and medium businesses are similar at 89% and 91% respectively.

5.2 Satisfaction with the various cost aspects of mobile services fell between May and August 2002. Satisfaction with overall value for money fell from 86% in May 2002 to 77% in August 2002. A similar observation was made this quarter amongst residential customers, possibly due to some changes in tariff structure made by some of the operators.

Figure 5a: % UK SME businesses satisfied with various aspects of their mobile service
Base: UK SME businesses with mobiles, ‘don’t knows’ have been excluded

5.3 In May 2002 small businesses were more satisfied than medium businesses with aspects related to cost (overall value for money, call costs (from mobiles), off-net call costs, costs to others calling your mobile). Figure 5b overleaf shows that this is no longer the case. Small businesses are now less satisfied than medium businesses with all aspects relating to cost, as mentioned in section 5.2, perhaps because of changes in tariff structure. In May 2002 86% of small businesses were satisfied with overall value for money. In August 2002 this satisfaction level fell to 76%. The respective figures for medium businesses were 81% in May 2002 and 80% in August 2002.

Figure 5b: % UK SME businesses satisfied with various aspects of their mobile service
Base: UK SME businesses with mobiles, ‘don’t knows’ have been excluded

5.4 The individual measures are not meant to ‘total’ overall satisfaction as there are likely to be many other factors which are not included in this survey which businesses consider important in contributing to their overall satisfaction with their mobile service.

footnote 3 -Before August 2002 'Geographic coverage' was worded in the questionnaire as 'Network coverage'.

footnote 4 - Before August 2002 'Ability to make calls without being cut off' was worded in the questionnaire as 'Dropped calls ie ability to make calls without being cut off'.

Reducing the costs of calling mobiles

Reducing in house mobile calling costs

Figure 6a: % UK SME businesses with mobiles taking steps to reduce the cost of calling their mobiles

Base: UK SME businesses with mobiles

Customers calling business’ mobiles

6.2 Figure 6b overleaf shows the extent to which businesses with mobile phones would consider or are currently using methods to reduce the cost to customers calling their mobile phones. Currently 70% of businesses with mobiles are using at least one of these methods up from 64% in February 2002. The increase is driven by small businesses where the proportion using at least one cost saving method increased from 64% in February 2002 to 70% in August 2002. Over the same period the figures for medium businesses remained steady at 72%.

6.3 Overall the figures are very similar to February 2002. 47% of businesses with

mobiles claim that if the customer is calling a mobile they keep the call short. This compares to 51% in February 2002.

6.4 The proportion of businesses claiming to have chosen the network by picking the one which is cheapest for others to call increased from 19% in February 2002 to 27% in August 2002.

6.5 18% claim to have a freephone or local rate number for calls to their mobile phone compared to 13% in February 2002.

Chapter 7

Network Comparisons

7.1 The areas where businesses feel the networks most differ is in the range of packages and tariffs offered (74% overall feel that they differ), and geographic coverage (71% feel that they differ).

7.2 For the three price measures (overall value for money, price of rental/ monthly packages and price of calls) at least 65% in each instance feel that there is some difference between the networks, as shown above. The areas with least perceived difference between the networks are range of services offered (52% feel they differ) and quality of customer service/ aftersales care (49% feel they differ). These findings are similar to those in Oftel’s residential survey.

7.3 Overall 91% of businesses believe that the networks differ on at least one of the measures at figure 7a. The figure for small businesses is 91% and for medium businesses 94%.

Annex 1

Q10 business questions on mobile telephony

Q1 Does your company own any mobile phones which are currently connected to a network?

Q2 How many mobile phones which are currently connected does your company own?

Q3 And thinking just about your company’s mobile phones, what is the approximate monthly mobile telecoms bill for your business. Please include all subscription and call costs and VAT.

Q4 Which of the following best describes the mobile phone packages your company uses?

Pre-paid (ie after paying a one-off fee for the phone, top up is bought as and when required)
Monthly subscription contract (ie line rental and call charges are paid each month)
All in one package (ie line rental paid in advance and calls either billed monthly or paid by call vouchers)

Q5 Are you satisfied with the mobile phone service and service supplier you use on the following attributes?

Overall mobile phone service
Value for money of overall package
Overall cost of calls from your mobiles
Amount it costs for others to call your mobiles
The cost of calling other mobile networks
Geographic coverage
Ability to make calls without being cut off
Congestion i.e. ability to access the network
Sound quality

Q6 Have you changed your mobile phone network or service provider? Was this in the last 12 months, 1-3 years ago, or more than 3 years ago?

Yes in last 12 months
Yes 1-3 years ago
Yes more than 3 years ago
No never changed supplier
Don’t know

Q7 When you changed mobile phone network or service provider did you keep all the same mobile phone numbers that you had with your old supplier?

Yes all
Not all but some
No none

Q8 Did you ask to keep your original number(s)?

Yes
No
Don’t know

Q9 Why did you change your mobile phone numbers?

Q10 Why has your company never changed mobile networks/ service providers?

Q11 Has your business taken steps to reduce the cost of calling your mobile phones by?

Using private wires
Using leased lines
Using mobile to mobile adaptions
Using some other method

Q12 I'm going to read out a list of ways that you could reduce the cost to your customers of calling your mobiles. For each one, please can you tell me if you currently do it, and if not whether you would consider it.

Calling your customer back on your mobile immediately after they called you so that you pay for the call
Keeping the call to your mobile phone short/perhaps arranging to discuss detail later when not on your
mobile phone
Choosing the mobile network which is cheapest to call
Encouraging customers to call you at times when the calls to your mobile are cheapest
Using a local rate or freephone number

Q13 Do you think that mobile networks differ a lot, a little, or not at all in the following aspects of service?

Geographic coverage
Quality of connection/ reception
Quality of customer service/ after sales care
Price of calls
Price of rental/ monthly charges
Range of packages and tariffs offered
Range of handsets available
Range of services offered e.g. text-messaging/ voicemail/ Internet access
Overall value for money

Q14 Did your company previously have any mobile phones connected?

Q15 Why did your company stop using the mobile phones that it used to have?