UK mobile network O2 has seen profits slump in the first quarter of the year as it struggles to retain iPhone customers.
O2 recorded a huge 33 per cent drop in its profits in the first three months of 2012, and its revenue fell by 6 per cent year on year in the same period.
The blame for the fall in profit is being placed squarely at the feet of the iPhone, which O2 had exclusively in the UK until October 2009.
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Many lucrative customers signed two year contracts when the iPhone was solely with O2, and now these contracts are up, customers are free to go elsewhere.
In an attempt to hold onto its high-paying iPhone customers, O2 is offering its users discounts to upgrade to the likes of the iPhone 4S, which in turn sees it sacrifice short-term margins in favour of long-term gains.
"The company's efforts in retaining the customer base have shown positive signs in contract churn which will translate into higher retained value going forward," said O2.