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| Mobile technology has reached the mass market and become a major contributor to the economy in the UK and in our other markets. |
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External view: "We have had a very good experience working together over the last two years. O2 is one of the most pro-active of the mobile companies, indeed one of the most pro-active of all companies, in thought leadership and in stimulating public debate. It's not just a case of sponsoring research and sitting back. O2 is really engaged in the process."
James Wilsdon, Head of Strategy at Demos.
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Response from O2: For two years O2 has been supporting Demos in looking at the future of mobile technology. We sponsored the Demos leaflet Mobilisation by James Harkin and have staged a series of seminars with Demos on child protection, privacy and health.
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The mobile phone industry in the UK has grown, in just 20 years, from nothing to an industry employing nearly 200,000 people and combined revenues in excess of £20 billion. According to research by the Centre for Economic and Business Research in the UK, commissioned by O2, the whole mobile sector contributed £22 billion to UK GDP in 2003, 2.2 per cent of total GDP.
The average employee in the mobile sector generated £120,000 in revenue. This is three times the national average. The analysis also reveals that the mobile industry contributes £15 billion a year to government finances, the equivalent to an additional 3 pence on the basic rate of income tax.
Our customers
We are concentrating on improving the customer experience by creating a culture of 'customer-centricity' that is supported by a Group-wide programme. We have made some good progress here. Our customer base grew in every region last year and now amounts to 20.7 million.
In Ireland we introduced the All Ireland tariff, which eliminates roaming charges between the Republic of Ireland and Northern Ireland. We introduced a new international calling tariff for post-pay customers calling African, Asian and European destinations, enabling foreign nationals in Ireland to call home at competitive rates. In Germany, the Genion HomeZone service combines advanced technology with reduced tariffs in defined areas. In the UK we introduced new Pay & Go packages, such as O2 Home for low-cost home-based mobile calls.
The improved performance of our UK network was recognised during the year when we were named Best Network Operator by the regulator, Oftel, now called the Office of Communications (Ofcom).
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External view: "Business in the Community Ireland is delighted to have O2 Ireland as one of our founder members. The company is active in our Strategic Corporate Community Involvement service and our Schools' Business Partnership and Danuta Gray, CEO, O2 Ireland, sits on our Board.
In June 2004, O2 Ireland launched, in association with the Irish Cellular Industry Association and other operators, the first ever Irish Code of Practice for the responsible and secure use of mobile services. We commend O2 Ireland for this initiative. It is a unique example of best practice and engagement with customers and competitors to raise standards and quality of service."
Tina Roche, Chief Executive, Business in the Community Ireland
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Response from O2: Together with Ireland's two other mobile operators
O2 Ireland has agreed to conduct an industry mobile content filtering trial. This trial will test content filtering software on a mobile network for the first time.
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Pricing and regulation
The price of mobile phone services and the complexity of tariffs continue to be a concern in many places. In Germany there is growing concern that young people are spending too much on mobile phones, especially on new data-rich services and camera phones. In Ireland, the regulator ComReg has called for greater price transparency in the industry, and the European Commission is continuing to investigate mobile operators' international roaming charges.
We co-operate with regulators openly to deal with such issues and take action. This year, for example, we introduced a flat-rate charge for all our roaming services in Europe. We offer pre-pay packages in all our markets so users can control their mobile phone costs. Our mobile phone tariffs are freely available both online and through our shops, which enables consumers to compare prices with other operators. Simpler pricing and clear roaming tariffs across Europe are also the aims of those operators who have joined us in the Starmap Alliance of European operators.
Regulation is starting to reflect the fact that our industry is mature and subject to tough competition. The new EU regulatory framework requires national regulators to remove regulation from markets that are competitive, and in the UK Ofcom has already reduced mobile regulation to reflect intense competition.
We would never knowingly break planning or advertising rules, hence this area of compliance is closely monitored by our compliance officers. During 2003/04 we received a notice from the local planning authority with regards to three temporary road advertisements that we had placed along the M25 motorway in the UK, the signs were removed once we had been informed about the incident. In 2003/04 we had no complaints about breaches of advertising rules.
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| Customers | Pricing and regulation | Our products | Protecting the vulnerable | Informing the debate | Privacy and security | Supply chain | Digital divide | Special needs |
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Our products and services
Mobile communication has evolved from voice telephony to sophisticated data services that constitute some £1 billion of our revenues. We aim to be a leader in this market.
During the year our general packet radio (GPRS), or 2.5G service, became a mass-market product and take-up of internet-driven services like e-commerce, banking, online billing, and music grew rapidly. We will increasingly offer more capable third-generation (3G) services in the UK, Germany and Ireland.
Our Xda II hand-held combined computer and phone and the BlackberryTM mobile e-mail device have been taken up widely. We have also launched a new O2 Digital Music Player to complement O2 Music, Europe's first mobile music download service.
Protecting the vulnerable
People want to be assured that we safeguard children and young people from accessing inappropriate material or contacts via their mobiles. As mobile technology advances, it is expected to become a channel for a wide range of services including pornography, gambling, financial services and direct marketing. We respect our customers' rights to make choices about the legal material they access through our network, but equally our customers want to be sure that we protect the vulnerable, particularly children.
During 2003/04 we published a series of child-protection leaflets providing practical advice on such issues as handset theft, the safe use of camera phones and grooming by paedophiles using chatrooms. The series is now available in O2 stores in the UK and Ireland and on our website. We do not market to children, in line with industry best practice. We address our child-protection material to adults and children's organisations. Our leaflets aim to raise awareness about personal safety amongst young people and children.
In January 2004, we helped publish a UK mobile operators' joint UK Code of Practice for the self-regulation of new forms of content on mobile phones such as visual content, online gambling, mobile games, chatrooms and internet access. A comparable initiative is under way in Ireland with an industry code published in June 2004, and we are advocating a similar approach in Germany. The UK Code commits us to providing information to parents and carers about new mobile services and devices as well as tools so they can control the internet content their children access.
It also provides for the appointment of an independent body to define the types of content to be classified as 18. Operators will require users to prove they are old enough before they access such content.
In Ireland we are launching parental authorisation to our services which will allow parents and carers to monitor their child's account and the services they access. We do not offer adult content, text or chat services in Ireland and are testing technology to filter or block unsuitable imagery.
Operators have agreed to help the police tackle illegal activity and to combat bulk and nuisance communications. All our chatroom services are now moderated, to try to identify and stop inappropriate exchanges. This is supported by the Nuisance Call Bureau run by O2 UK, which is equipped to advise customers on the appropriate use of mobile phones.
As new web-enabled services become more widely available, we know that the problem of virus contamination, junk marketing and hacking may become more serious. We are working to find solutions, and through the implementation of the code we will also look into tackling unsolicited communications, also called spam.
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External view: "We recognise O2's commitment to address social and environmental issues in its supply chain and to foster the development of industry standards through its contribution to initiatives such as GeSI. In our view, companies that systematically integrate these issues into procurement demonstrate a comprehensive approach to risk management. As such, O2 would further benefit from advancing the training and incentivisation of its procurement staff. Clear policies on end-of-life management would also enhance the company's responsible approach to its business operations."
Claudia Kruse, Senior Analyst, ISIS Asset Management
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Response from O2: Together with Ireland's two other mobile operators
O2 Ireland has agreed to conduct an industry mobile content filtering trial. This trial will test content filtering software on a mobile network for the first time.
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Informing the debate
We are demonstrating how mobile phones play a positive role in public life and this year published a book, 'Options – mobile technology in public service', describing 100 different areas where mobiles are being used in socially useful ways from car-fleet services to doctors' appointment alerts. We are stimulating debate about the potential future benefits of digital technologies through our opinion-leader seminars. This year we arranged a series of seminars on subjects such as privacy, child protection and health.
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| Customers | Pricing and regulation | Our products | Protecting the vulnerable | Informing the debate | Privacy and security | Supply chain | Digital divide | Special needs |
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Privacy and security
Customer privacy is an increasingly sensitive issue and we believe that the introduction of location-based services – which will identify a mobile phone user's position – could infringe a person's right to privacy. We are working on a code of practice with other operators in the UK.
We are committed to respecting customer confidentiality, but we are obliged by law to make customer records available to police on production of a court order. Heightened security fears have increased the pressure on us in this area and, under UK law, other emergency services can demand access to records. We try to balance individual rights and the wider national security carefully. In 2003 we set up a new Fraud and Security Helpdesk in the UK, including a 365 day, 24-hour customer contact number to respond to queries more effectively.
The O2 Airwave network is more than two thirds through its roll-out to police forces in mainland Britain. If adopted by fire and ambulance services it will provide interoperability between the emergency services, which is currently not possible. O2 Airwave's campaign to support road safety for children is designed to underline its wider role in making Britain safer.
Supply chain
We work with our suppliers to raise awareness about ethical sourcing. Our Ethical Procurement Policy, based on the Ethical Trading Initiative base code, outlines what we expect of our suppliers on key issues such as employment standards and health and safety. We have surveyed a number of our major suppliers with a self-assessment questionnaire and will be widening the scope to cover more suppliers in 2004/05.
We belong to the Global e-Sustainability Initiative (GeSI) and are part of its supply-chain working group which aims to develop common best-practice principles and tools for use in the information and communications technology (ICT) sector. We will use this to benchmark our activities and set targets. In October 2003 we helped arrange an event in Geneva, Switzerland about ethical sourcing. In 2003/04 we were involved in four important supply chain studies by independent organisations, including 'Clean up your Computer' led by the Catholic campaigning organisation CAFOD, two studies by Insight Investment and one for FTSE4Good on responsible supply chains.
The payment terms for major contracts are agreed at the same time as other terms are negotiated with individual suppliers. The Group's policy is to pay for other purchases within 30 working days of the invoice date, provided the invoice is presented in a timely fashion and is complete. We aim to pay our creditors promptly within 30 days of a valid invoice being presented. The Group had 34 (2003: 32 days) days' purchases outstanding at 31 March 2004 based on the average daily amount invoiced by suppliers during the year.
Digital divide
The majority of the West European population, of all income and age groups, subscribe to a mobile service. But access is not always equal because of cost or geography.
We try to narrow this digital divide. The Group's Chief Technology Officer, Dave Williams, has joined the UK Government's Digital Inclusion Panel to support this effort. In all our markets we offer our adult customers pre-pay packages regardless of background or credit history, allowing everyone to benefit from mobile communications. Pre-pay mobile phone services enable the users to control the associated costs of using a mobile.
Our telecommunications networks cover substantially all of the population of the UK, Ireland, the Isle of Man and Germany (in conjunction with our network sharing agreement with T-Mobile). In Ireland we are the only mobile operator to gain government funding to install wireless broadband (WLAN) hot spots to selected locations and recently installed one in the civic offices in Westport, County Mayo as part of this initiative. We are also part of an industry initiative to fund the roll-out of broadband to all 4,100 primary and secondary schools in the country. In the Isle of Man we have rolled out fixed-line broadband internet access to 98 per cent of all households and businesses at discounted rates agreed under a new licence from the Manx Government.
Services for customers with special needs
We want to examine ways to make our services more inclusive, particularly for people who require special assistance to meet their needs and for whom mobile services could make daily life easier. There is room for much greater development of services for people with disabilities. Although we have made special provisions – like invoicing in Braille, large text size and audio options for people with visual impairment and enabling special text services for the deaf – we recognise there is more we could do. We aim to be fully compliant with General Code 15 and the Code of Practice for Service Delivery for Disabled and Elderly Customers in the UK before March 2005. Outstanding measures are: free directory and relay service for visually impaired customers; lack of literature on appropriate devices; and the O2 internet portal. We work with leading organisations in this field and belong to the Employer's Disability Forum to understand how to respond.
In Ireland we have launched a new handset in association with the National Council for the Blind of Ireland (NCBI). The device has specially tailored 'Talk' software that converts text messages to voice and tells users what the phone is doing as they use it. We have redesigned our British and Irish website to improve accessibility and navigation for visually impaired users.
During the year we supported DisabledGo, a UK-based not-for-profit, social enterprise funded by business. DisabledGo operates a website for disabled people and their carers, giving detailed information on access to services like hotels, cinemas, restaurants, solicitors' offices, pubs and train stations. We are testing whether we can offer the service through mobile phones.
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| Customers | Pricing and regulation | Our products | Protecting the vulnerable | Informing the debate | Privacy and security | Supply chain | Digital divide | Special needs |
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| OUR BUSINESSES |
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| Our business is growing but we want to make sure it continues to meet your needs. How do you think we can improve? > |
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| Are we doing enough to make sure our suppliers behave ethically? |
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| We have set a target to increase the number of employees contributing to community projects through Can Do Giving by 25 per cent. |
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