More disruption ahead as Ovo thinks big
Ovo's bid to enter the big time marks a landmark moment for the energy industry
We’ve always known Ovo had big plans – the ambitious poster child of challenger brands and its enigmatic chief executive have always promised nothing less than disruption.
But Ovo’s bid to acquire SSE’s retail arm is a landmark moment, not only for the company but the entire energy industry. In a week of momentous announcements that also saw the European Commission grant Eon leave to take over Npower’s parent company Innogy, the big six as we knew them are set to change forever.
If the £500 million SSE deal gets the regulatory go-ahead, it will see Ovo’s 1.5 million customer base swelled by SSE’s 3.5 million. And we will witness a star market agitator – founded a mere decade ago – catapulted into the big league overnight.
Ovo, said to have been investing heavily in scaling up, has come up on the inside track. And it’s a merger proposition that must surely tick the box on market competition – with an insurgent poised to take over an incumbent.
Yet, unsurprisingly, sector speculation is rife about whether this is a masterly stroke by Ovo or a high-risk gamble.
The company, renowned for its agile business model and extensive (though not universally) digitally savvy customers, is poised to inherit millions of SSE accounts – many of whom will be on standard variable tariffs and be less engaged with their supplier.
But it is precisely this legacy that one industry source this week viewed as a major factor in Ovo’s favour.
“One of the key points new brands first raised was how there was a big chunk of customers who didn’t engage and were being disadvantaged. This is a brilliant chance for Ovo to show that even disengaged people who don’t move around can get a good deal.”
Ovo would also be inheriting a loyal SSE customer base, thanks to generally consistent satisfaction levels.
Of course, operating on a grander scale in an increasingly low-margin business will bring its own challenges. And any lingering Scottish brand loyalty may be tested north of the border if the companies are ultimately unified under one overall name.
Nothing is certain in a market where the unexpected is the new normal.
Except for the fact that the big six are no longer untouchable.