O2 goes after Erricson for damages after service outage

Last week O2 suffered the collapse of its data network. The outage hit O2, GiffGaff and Tesco Mobile users and O2 wants compensation for the problem and is turning to Ericsson for it. Ericsson, who supplies O2’s data coverage service, could be facing tens of millions of pounds in fees, with some estimates reaching as high as £100 million.

As a network provider, O2 is the second largest in the UK, with 25 million customers. A further seven million people also rely on O2’s network as a result of affiliate deals with Sky, GiffGaff and Tesco.

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The blame for the outage seemingly falls to Swedish telecom’s giant Ericsson,  who allowed its software certificates to expire. Now O2 plans to claim damages to the effect of tens of millions of pounds but this raises a few questions, namely what it’s actually for and if those affected will actually get any money back?

O2 outage: Will customers be compensated?

O2 has said it will be issuing compensation to its customers. This takes the form of a refund on two day’s worth of a customer’s contract or, for those on Pay as You Go, an extra 10% when you top up in the new year. Those who use mobile broadband devices will get 10% off when they buy more data.

In other words, O2 isn’t paying out. All three options simply result in O2 receiving less money from customers if they continue to be a customer. It’s not yet known exactly how much the outage has cost O2, however, their refund to contract customers is seemingly only going to make roughly a 6.67% dent in revenue for one month – based on a 30 day month.  

It’s arguable that it’s more desirable for a company to take a hit on potential revenue than to show higher outgoings in financial reports. What’s more, the refunding process takes time and costs, so it could be seen as a beneficial move to customers who don’t want to wait for compensation.

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That said, O2 is, essentially, paying nothing out to its customers. What’s more, if Ericsson ends up paying the full rumoured £100 million sum, and costs to O2 are actually lower than that figure, then O2 could be set to benefit from the outage.

Understandably, the long-term impact might be a loss of customers come contract renewal, however, in the short term the company could be breathing easy.