Spark, Vodafone and M2 respond to 2degrees entering the broadband market

  • Marketing
  • August 11, 2015
  • Damien Venuto
Spark, Vodafone and M2 respond to 2degrees entering the broadband market

Since 2009 when 2degrees first entered the local mobile market, the company has attracted over a million customers, which came largely at the expense of Vodafone and Spark. And now, with the launch of its broadband offering, 2degrees is again being pitted against these competitors as well as a few others.

“We hope our entry in to the broadband market encourages people to shop around more for broadband providers – and of course we would love them to join us just as 1.3 million mobile customers have done,” says 2degrees chief marketing officer Malcolm Phillipps.

So what are the chances of 2degrees shepherding its mobile herd into the flock?

“There’s always a risk,” says Taryn Hamilton, who was recently appointed M2 Group’s general manager of consumer for Slingshot, Orcon and Flip.

“2Degrees entered the mobile market with a huge price advantage, and it doesn’t have that. That said, it’s a strong brand, with a big mobile base, and plenty of media spend, and that should make all of us a little nervous.”

​Phillipps is optimistic about 2degrees joining the broadband market, but he concedes that growth might take a bit longer than it did with mobile.   

“We expect to grow rapidly, but it will take longer to grow than mobile as the market conditions are quite different,” he says. “The broadband market is quite different to mobile – there are more operators and with ultra-fast broadband, we all have access to the same network at the same cost.” 

However, if claims that traffic to the 2degrees website broke records after the launch of its broadband offering are to be believed, then the public is clearly interested in finding out more about what the telco is offering. And, according to Phillipps, customers like what they’re finding.

“While we won’t be providing you with any specific numbers, what I can say is that a lot of 2degrees mobile customers were waiting for our broadband offer and have already signed up in the last two weeks,” says Phillipps. “Overall, growth is exceeding our targets and is well ahead of the numbers Snap was getting as a stand-alone fixed operator, so clearly the 2degrees brand is resonating with customers beyond mobile.”

2degrees entered the market with a pair of options ($69 for 80 gigabytes and $89 for unlimited) and a campaign via Special Group, and Phillipps says early customer feedback indicates that customers like the simplicity of the plans.

These price points are, of course, very similar to those set by Vodafone, leading the red telco’s consumer director Matt Williams to take a jab at its new competitor.

“We welcome 2degrees as a new joiner to the broadband market,” Williams says. “Of course, imitation is the sincerest form of flattery – and we were interested to see that some of their pricing and offers are remarkably similar to our own.”

This simple approach to pricing is also reflected across the M2 portfolio, with each of the three brands offering deals targeted at different segments of the market.

When asked about the 2degrees’ apparent copycat pricing, Phillipps explained that there was more to the strategy than price matching.

“It’s not just about price,” he says. “Our main focus was on developing plans that provided value and simplicity to our customers. Another key factor is providing the best service available to the customer's address at no extra cost.”

On the second point, Phillipps refers to a study from Chorus that shows that most Kiwis could access better quality broadband if they changed their providers.

“Stats from Chorus indicated that a massive proportion of New Zealand, approximately 60 percent, have access to better broadband than they currently receive. Our aim is to help deliver on that by providing the best broadband available at a customer’s address for no extra charge, and as better broadband becomes available, actively promoting the opportunity for our customers to upgrade.”

Of course, the current players in the market aren’t just going to sit around and wait for 2degrees to swoop in and acquire their customers.

In fact, Spark PR manager Lucy Fullarton explains that Spark actually kicked off its marketing play several months ago.  

“For the past three or so months we’ve offered Fibre 30 plans at the same cost as standard broadband, and this has had a great response from our customers,” she says. “Extras like free Lightbox give another compelling reason for people to join us.”

And on the topic of content sweeteners, Vodafone recently sent out an email offering current broadband customers 12 months’ free Neon if they renew their contracts. And at a time when consumers aren't necessarily bound by one- or two-year-long contracts, this content play could be important in terms of keeping customers locked in over an extended period of time.  

   

In addition to this, Williams points out that Vodafone has also established an ongoing partnership with Sky on more traditional TV deals.

“Vodafone is the only broadband provider that offers customers the ease of getting both their Sky TV services and broadband billed from one provider,” Williams says. “These customers are also offered the value of free MySky every month - as well as a $10 discount on their broadband when they have their mobile services on account with us.”

A Sky subscription carries with it the promise of the Rugby World Cup. And although Vodafone is precluded from mentioning the sporting event due not being a sponsor, it has embraced the national sport with its latest Piggy Sue ad and thrown around a few “big game” references in its recent advertising efforts, just like Samsung

Keith the Postie is a little short on players this weekend, so he’s recruited his smaller friend as a flanker. Oink!

Posted by Vodafone New Zealand on Tuesday, 4 August 2015

(However, despite this range of deals, some potential customers seem completely uninterested in broadband and would rather like a lifetime supply of pork—it’s unclear whether future deals will come with this perk).

Last year, Spark also made a major content play by providing all 600,000 of its broadband customers with a year's free broadband. And now 2degrees has also joined the internet TV action with a six-month subscription to Neon.

M2 is the only player that isn't offering a content deal, and Hamilton explains that this is because the company remains focused on doing its job as a broadband provider. 

"Everyone is getting onto the bandwagon of bundling content plays, which is really interesting," Hamilton says. "Slingshot took a really different approach with that, and we consider ourselves first and foremost as an enabler [with its controversial and now defunct Global Mode service]. We need to be experts at making sure that people have a great Netflix experience or that YouTube and Facebook work really well rather than necessarily clamouring to partner with these guys. Our strategy when Netflix entered the market was to make sure that we had our network infrastructure up to spec, because we knew how much volume it was going to command. This is quite a different strategy. You would’ve seen quite a lot of press over the last month or so about the big guys whingeing about how much Netflix was consuming, and we were sitting there going, ‘Well, shit seriously? Are you for real? You know, did you not anticipate that this was happening? And are you forgetting, first and foremost, that it’s your job to make sure that people can consume this content to high quality?’ So, our category, in the short-term, is to focus on being a good internet company. Content is sexy and Netflix is sexy, and it’s sexy to partner with these types of companies, but this can also make you lose focus of your core responsibility, which is just to make sure the internet works properly."    

Most of these issues are relevant to the consumer market, but 2degrees' broadband move is also important play in terms of attracting business customers—and this space looks poised to heat up competitively over the next few months. 

Phillipps previously told StopPress that 2degrees has been quite successful in terms of attracting business clients, and this has been reflected in 'Smartest Business People' campaign, which featured Dion Nash, Al Brown, Kate Sylvester and Geoff Ross, and its recent focus on the companies that had switched to 2degrees, such as Whittaker’s, Jucy and Lewis Road, is in a similar vein (these campaigns are both also good examples of the behavioural economics principle of herding).

Adding high-spending business clients is also important in terms of generating revenue—something that is particularly pertinent to a company that currently has accumulated losses of $362 million since it first opened its doors. And the launch of broadband has led telco anaylst Paul Budde to change his view on the company's prospects

"... At this point in time the picture is no longer as bleak as it has been before. So good on 2degrees as it is essential for New Zealand to have a viable third infrastructure based competitor in the market."

One thing that is clear is that the other players in the market are going to take the challenge from 2degrees seriously, and this will no doubt up the competitive ante as the Kiwi telco market continues to mature over the next few months.   

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