Tesco Mobile, a joint venture between a major supermarket and Virgin Media O2, faces a financial challenge.
- Despite achieving over £1bn in sales, Tesco Mobile reported a pre-tax loss of £449,000 for 2023.
- This marks a shift from the £8.3m pre-tax profit reported in 2022, highlighting a significant downturn.
- The company cites market pressures and changing customer behaviour as factors affecting their performance.
- Amid losses, Tesco Mobile aims to boost its customer base with new products and tariffs.
Tesco Mobile, collaborating with Virgin Media O2, has confronted an unexpected financial setback. In 2023, the mobile provider surpassed the £1bn sales mark, yet recorded a pre-tax loss of £449,000. This outcome starkly contrasts the £8.3m profit from the previous year, signalling a downturn in the company’s fiscal performance.
The joint venture’s revenue ascended from £969.5m to £1.05bn, predominantly aided by robust sales of high-end handsets. However, the competitive mobile telecommunications market and diminishing handset market size posed challenges. According to the board, the group achieved a notable performance despite these hurdles, alluding to the adverse conditions hindering expected profitability.
Customer dynamics have notably shifted, contributing to the financial results. While Tesco Mobile’s overall customer count marginally increased to 5.51 million, shifts in preferences were evident. Contract customer numbers rose by 6.2% to 4.01 million, yet the prepaid segment witnessed a 9.4% contraction, settling at 1.50 million. This shift reflects broader changes in consumer behaviour within the industry as users increasingly prefer contract-based services over prepaid options.
The company has proactively responded to these challenges with strategic initiatives aimed at recapturing its market position. In a bid to extend its customer base, Tesco Mobile has resolved to develop and launch innovative products and tariffs. It plans to leverage its unique supermarket mobile positioning—a strategic advantage borne out of its partnership with a leading supermarket chain—to entice new customers.
Significantly, the company completed a major system transformation in early 2023, successfully migrating postpay customers to a new provisioning and online charging platform. This transformation is part of a long-term strategy intended to streamline operations and enhance customer experiences. Additionally, the partnership renewal between Tesco Mobile and Virgin Media O2, concluded in late January 2024, reinforces the alliance that originated in 2017. This renewal vows continuity for another decade, solidifying the collaborative framework that both entities rely upon for mutual growth.
Despite financial setbacks, Tesco Mobile remains committed to innovation and customer growth.
