Tesco plots to conquer telecoms sector

Supermarket seals deal with Cable & Wireless that will allow it to offer discounted internet and landline phone packages



Tesco is building up its assault on telephone and broadband firms with plans for hundreds of new in-store telecoms outlets and discounted packages of internet and landline services.

Britain's dominant retailer is already a growing force in the cut-throat telecoms market and said it saw more opportunities for big returns from mobile-phone users and broadband customers as it sought to build up its non-grocery revenues.

Bosses announced a five-year deal with Cable & Wireless for it to supply Tesco with wholesale broadband services. Lance Batchelor, the company's telecoms chief executive, said the tie-up would allow Tesco to offer customers home-phone and broadband packages for the first time. That will pit it against names such as Virgin Media and BSkyB, which have long wooed customers with bundled services.

Batchelor flagged up Tesco's "unique ability" to differentiate its offerings through Tesco's rewards scheme and by bundling a wide range of goods and services, for example a laptop sold with a broadband package. "Our goal: to become a leading provider of telecoms services and products to Tesco customers, with the medium-term potential to generate around £2bn revenue and around £200m profit," he said on Tesco's website.

The supermarket already has a fast-growing mobile network, which it launched in 2003 as a joint venture with O2, and it sells handsets as well as mobile and broadband contracts through 100 phone shops in its stores. By also selling telecoms services online and from the supermarket aisles in Tesco stores that do not have a phone shop, the retailer's weekly sales rate of mobile contracts has quadrupled during 2009.

It now plans to double its number of phone shops to 200 by the end of 2010 and eventually hold a nationwide network of 500, pitting it against high street specialists such as Carphone Warehouse .

The new details of Tesco's telecoms push come weeks after it outlined plans to build a full-service bank offering current accounts and mortgages. Andrew Higginson, the chief executive of Tesco's retailing services arm, today reiterated the company's focus on financial services and telecoms as "big, profitable sectors".

He said: "We have demonstrated we can be successful in specific product categories with modest market shares ... However, significant parts of these markets remain untapped."

The retailing services arm – including the Tesco.com home delivery service – contributes about £500m to Tesco group profits and the company wants to double that to £1bn.

Workers act to avoid business closures
Unpaid overtime and leave are commonplace as 53% of workers say they have helped keep their employers afloat

More than half of UK workers have taken some form of action to help their employers survive the recession, according to research published today.

The survey reveals the extent to which workers have engaged with employers to stave off job losses and company closures.

Unpaid overtime is the most commonly cited form of assistance, according to the poll commissioned by insolvency trade body R3, with one in three workers claiming they have worked longer hours without extra pay.

Around 15% of employees said they had either accepted a pay freeze or deliberately not requested a pay rise, while 14% had taken unpaid leave. In total, 53% of respondents said they had made some form of personal sacrifice in order to help keep their employer afloat.

President of R3, Peter Sargent, said: "These people are the unsung heroes of the recession. In some cases we've seen they have made the difference between [a businesses] survival and collapse."

While in many cases redundancies have proved unavoidable, the recession has also been notable for the collaborative approaches taken by some employers towards saving jobs.

Earlier this year more than 80% of KPMG's UK partners signed up to a scheme to reduce hours and pay, while BT cut executive pay increases and proposed that staff in a small area of its business take up to a year off in return for agreeing to a 75% salary cut. A BT spokeswoman said the scheme was "very well received" by those who were offered it.

Mike Emmott, employee relations adviser at the Chartered Institute of Personnel and Development, said: "These redundancy avoidance strategies are uncharacteristic of anything that happened in the 1990s recession.

"In the past, companies never thought about the negative effects of mass compulsory redundancies. Now they realise if you want a happy, engaged workforce you don't start by dismissing as many people as you can, as soon as you can."

Although last week's unemployment figures showed the smallest rise since spring 2008 – raising hopes that the worst of the recession may be over – the CBI said nearly two-thirds of employers were operating some form of recruitment freeze and 45% had introduced more flexible working.

Perhaps surprisingly, given the public outcry over bonus payments, the R3 survey also found that only 10% of eligible workers were not paid a bonus that they would otherwise have expected to receive.

Money

Santander launches 'fee-free' bank account

Zero current account, which will not charge customers for going overdrawn without permission, is unveiled days before a ruling on unauthorised bank charges is expected


Santander, the banking group which includes Abbey, Bradford & Bingley and Alliance & Leicester, today announced plans to launch a current account which doesn't charge fees when customers go overdrawn.

The Santander Zero current account, which will be available from January, will levy no charges regardless of whether the account holder agrees an overdraft limit or goes overdrawn without authorisation.


Customers will pay an interest rate of 12.9% on any borrowing – the cheapest overdraft rate on the market – and will not be charged foreign exchange fees or for using ATMs overseas.


In addition, customers who credit their account with at least £1,000 a month will be able to earn 6% gross interest on credit balances for one year.

However, to qualify for the account a customer must have, or be applying for, a mortgage with Santander. Existing customers with Abbey and Bradford & Bingley, which are to be rebranded under the Santander banner in January, will also be eligible for the deal, while Alliance & Leicester mortgage customers will qualify later on in 2010 when that bank is also rebranded.


The offer reflects a growing trend towards lenders offering tied deals. Last month, Nationwide Building Society launched mortgages available only to its current account customers.


Santander's announcement comes days before the ruling on a court case about overdraft charges is published by the supreme court. The case was brought by the Office of Fair Trading (OFT) against eight high street banks to determine whether it could legitimately rule on the fairness of bank account charges.


If the OFT wins it is expected to rule that banks have levied disproportionate charges on those with unauthorised overdrafts, opening the way for compensation for about 1.5 million account holders who have already lodged claims with their banks.



Court ruling denial

But Vim Maru, director of retail products for Santander UK, denied the account was being launched in reaction to the anticipated ruling and claimed the group, which has 2 million mortgage customers, wanted to offer better value to loyal customers who take out more than one product.


"We want to do more business with our customers and to have a primary banking relationship with them. The more business they do with us the better value we can give them," he said.


"We will, of course, continue to offer great deals for new customers, but the greatest opportunity lies with our ability to do more business with our existing base of 25 million customers."


Maru said the fact that the Zero account doesn't charge fees did not mean the bank would be lending irresponsibly, and that account holders who held an unauthorised overdraft would receive a letter to advise them of the situation.


Kevin Mountford, head of banking at moneysupermarket.com, said: "Santander has clearly taken heed of broad concerns around charging structures and looked to wipe them all away in one fell swoop."

However, Justin Modray, director of financial website Candidmoney.com, said that while the account was attractive to those applying for one of Abbey's fixed-rate or tracker mortgages, those on its standard variable rate were paying an uncompetitive rate of 4.24% and would be better off switching to a different lender.


"Many of these customers could likely save thousands of pounds by moving to a better rate elsewhere, more than outweighing any bank charges they are likely to incur on their current accounts over the life of their mortgage," Modray said.

"Especially given these charges look set to continue receding, and probably at a faster pace still if the supreme court rules in favour of the OFT next week."


Customers who already have overdrafts with another bank will be able to transfer those debts over to the Zero account, subject to affordability checks. The account will be launched on January 11.