Octopus Energy Now Front Runner to Gobble Shell Energy UK
News reports are this afternoon claiming that Octopus Energy is now the frontrunner to acquire UK retail energy and broadband ISP Shell Energy from its parent group, although they haven’t yet entered formal exclusivity and that means rival bids (e.g. from Ovo Energy) could still upset an agreement.
At present, Shell Energy UK is home to around 500,000 broadband and phone customers, as well as 1.4 million energy users. Some 2,000 UK people also work for the division. But the retail provider has faced plenty of challenges over the past few years (e.g. they lost almost £220m across 2020 and 2021), not unlike other energy providers, and thus Shell have been looking for a way out (here).
According to Sky News, Shell is looking to sign a sale agreement sometime this autumn, although it’s widely predicted that the new owner – whomever it ends up being – may well sell off (divest) Shell Energy’s telecoms (broadband and phone) base in the process.
Something similar happened when Ovo acquired SSE last year and then later sold their retail broadband base on to TalkTalk (here). But Shell Energy is a much larger player and TalkTalk, which is wrestling with its own debt problems, may struggle to find the cash to have a punt. But Vodafone could be another potential suitor at this scale, as could Sky Broadband.
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and Linkedin.
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Well, they might sell off the telecoms arm, but its noteworthy that Octopus Group (who own Octopus energy) are also the ultimate owner of Fern Trading, who own Giganet (Jurassic, Swish, Cuckoo and others). And Giganet are already using the Octopus CRM platform Kraken for telecoms customers.
Would seem a no-brainer to move the Shell Telecoms customers to Giganet, possibly even under a new label Octopus Broadband offer. From a Shell energy + telecoms customer point of view, they become Octopus customers on initially the same terms they had with Shell, just a different name on the bill, no big deal. For Giganet, more customers to carry the CRM overheads, and some of whom will be fibre cross-sales prospects.
Giganet is not available everywhere, so it would be difficult to move all the customers to it.
They don’t need to have Giganet fibre, the point is that adding a big slug of Openreach customers is relatively easy – they’ve already got the CRM and the telecoms expertise to operate as an Openreach ISP, and they can use Shell’s existing systems whilst they make the necessary arrangements to the Giganet platform to support Openreach connected customers.
And if they did it as Octopus Broadband, then that becomes a cross sell for all of Octopus Energy customers. Works very well for Utility Warehouse, and potentially makes Shell much more valuable to Octopus than for any other potential buyer.
How interesting hearing about the CRMs. I wonder what CRM Vodafone and Sky use. I believe Sky uses Hansen?
@Andrew G, you are right they don’t have to use the gigabit network, but they will want to, after all why pay openreach when they have their own network? We will see what happens, makes no difference to me as long as Octopus don’t get like other energy providers due to their size. I doubt very much if I will change broadband provider now unless Zzoomm mucks up or go belly up.
@Ad47uk: Regarding both Zzoom and Octopus, as a trend, it’s age and size that stuff a services supplier. When somebody starts a new business, they’ve got shiney new modern systems all set to go; Their databases are purpose structured and unpolluted by incomplete data, inaccurate data, and the tiny number of weird “edge cases” that every industry has that screw up the assumptions upon which the systems are built. And as a new supplier they can cherry pick the bulk of your customers according to their own criteria through marketing even if the regulator insists you don’t discriminate. Example on that last one – Ofcom say you have to accept all customers on an equal basis. Company decideds that affluent social class AB customers are what it wants, so it avoids like the plague price comparison web sites, and advertises in Country Life, GQ, and the house magazine for Waitrose (if they take adverts, I shop at Aldi so I wouldn’t know). All made up, you get the drift of my argument.
So that’s the shiney new world. Ten years or more down the line, you’ve got dated technology, had repeated changes to your systems – some at the behest of your own sales and marketing team, others due to changes to telecoms or consumer finance regs, or changes to consumer rights regulations, or “upgrades” or compatibility changes from changes to linked non-CRM systems, or because your IT vendor has “upgraded” the CRM system. Your IT is now convoluted and complex (trust me, this is all for real). Your data is also getting worse by the day – despite best efforts and data cleansing, the longer you’re in business the filthier your data gets. Eventually it’s dirtier than the nostrils of a commuter on the Bakerloo line. This is things like the system needs an end of contract date, for various possible reasons one doesn’t get added, or the given address doesn’t match Postcode Address File, or the name of the account holder is incorrect, whether a one letter typo “Anderw”, or surname and first name transposed, etc etc. Always, always happens. And over time, your carefully segmented marketing strategy can’t keep out the hoi polloi, or those edge cases. Then you have to deal with complex problems like social or welfare needs, or bad debt and the like.
So over time, the rolling stone does in fact gather moss. The bigger a company is, the longer it has been around, the greater these problems are. Don’t take my word for this – Ofcom data I can’t see but Ofgem separate complaint data by company size. Latest data shows large energy suppliers average around 1,600 complaints per 100k accounts. Medium sized suppliers average around 1,200 complaints. Small suppliers are around 500. Some large variations between companies, but the big picture still stands. Stick around and/or grow, and your prized trove of data turns to a crock of ****. Been there, done that!
And just to pick out Octopus, I do give them that they’ve been doing a grand job, even so their complaints per 100k customers were a mere 565 in Q2 2020, latest data shows 1,010 for Q1 2023. And it’s a very progressive increase, likely to creep up to the circa 1,900 large company average. When in a few years somebody decides that Kraken is no longer the right tool, they’ll do a wholesale CRM change to Salesforce, SAP or Oracle, and customer complaints will leap dramatically – as I said, seen it all before from the inside.
Octopus are getting too big for their boots imho. I hate seeing giant corporations gobble up everything.
Getting too big for their boots? In the grand scheme of things Octopus aren’t that big – there’s about 150 UK listed companies with larger turnover, and probably another 50+ that are foreign owned. Add in 30 privately held UK businesses with larger turnover, and that’s 230 businesses in the UK that are larger than Octopus. They have fingers in many pies, but what’s wrong with that?
I must admit, I am a bit worried about them getting too big. I was moved to octopus when Engie decided it did not want home energy users.
I do like Octopus, for a start they don’t bug me about smart meters as much as the others, prices are ok and the customer service is good. The problem is when companies get too large, customer service goes to pot.
Read the reviews from employees on Glassdoor.
I agree, I changed to Octopus several years ago when I was launched, mainly because of dealing with a small company
I’m with Octopus and they can get as big as they want. Their customer service puts most to shame.
Would have to agree. There’s a reason they’re growing at the rate they are and it isn’t just by buying customers or being the “provider of last resort” *Side-eyes British Gas*
Are they perfect? no. Are they significantly better than the rest of the market? Looks like it.
As long as they keep performing, and having good customer service why would you care if they’re #1 or #10 in terms of size in the UK?
Not just Customer Service. Their energy usage information is so granular when you have a smart meter. The whole energy insight platform they have built really is top notch. It would be nice to see them expand into broadband imho they’d probably do pretty well. Hopefully they could get onboard with a few providers like Netomnia, CityFibre, Giganet etc not just Openreach.
Very good point. The 30minute breakdown on my bill is super useful to see what/where usage had been going.
The Home Mini so you can pull the live smartmeter data up on their app vs using the in home display is also mega useful.
Would disagree. Take weeks to get back to you by email and then weeks to get anything done.
Emailed in April/May and only just had smart engineers round to try and fix my smart meters, gas is working now but electricity is still not reporting data.
I’d move if I wasn’t in a fixed contract that I signed up for before the cost crisis started, their loyalty bundles seem decent too.
At least they sent me a huge cuddly octopus toy.
@Matt, I don’t see the point, you use what you use, by the time you know how much it is costing you to boil your kettle it is already done. One reason why I won’t have a smart meter.
@Ben, been first class for me, when ever I contacted them, it is not often I contact them, but when I do, I get an email back pretty quickly.
@Ad47uk – Octopus have a couple of tariffs which make use of the smart meter’s ability to read daily or half-hourly. Tracker and Agile for starters, plus their Go/Intelligent tariffs for charging electric cars.
I’m on Tracker; since January their rates have been around 2/3 that of the standard tariff. Okay, that can go up (and probably will in Winter), and some days it’s more expensive than others; but when I’ve got stuff which isn’t needing to be done right away it can wait for a cheaper day.
It isn’t for everyone, but it’s handier than just “you were using 3kW while the kettle was on and now you are back to 70w”
@Blueacid, I realise that some of the smart meter tariffs may save money for some people, Some may even save me a quid per month, but I have issues with smart meters, well not the smart meters as such, but what can be done with them and the control that the energy company, regulators and government can have over them.
As I said, Octopus don’t bug me that much about having a smart meter, they stick the odd notice on their app and may email now and again. they go through a stage last month of bugging me a bit more than normal, but they have stopped again now .
I like octopus as far as you like an energy company, they seem to be one of the better ones.
@Ad47uk – we are with Shell. Not getting a smart meter anytime soon.
Have you seen the news where smart meter customers were remotely switched to prepay without their consent? Seems like nothing but bad news.
The monthly usage graph on the website is plenty for us to control our usage. We’ve halved our usage but now pay triple…
@Raj, yeah i saw the news about people being switch to pre-payment meters, but only if they fail to pay the bill by all accounts. I had my gas meter changed 18 months agoish, due to it getting old and they wanted to put smart meters in then. I refused, and they put in a gas meter that was older than the one I had :). Next year I think my electric meter will get to that stage, but by all accounts now if your meter is changed then they have to install a smart meter, so next year could be fun, as I will fight not to have a smart meter.
I’m also with octopus and they’re a great service provider. I wish them all the best well done
Octopus are the best rated utility supplier according to Which? I switched to them from Edf and have found them superb. They have the right attitude to customer service and could transform the value end of the U.K. broadband market.
Only if you pay by direct debit. Follow their kraken CRM bull crap and they’re good. Pay by another method and they treat you like crap. They lie too! Not impressed and leaving at the end of the month. I played the game but am bored with their ‘you must pay monthly’ nonsense. Horrible company and be glad to see the back of them.
To fund all this they must be borrowing heavily and when it comes crashing down it’ll be the tax payer as usual that picks up the bill.
I’m with Shell Energy and the smart app is lousy.
Customer Service is poor, so being bought by Octopus might be good.
Unfortunately, there’ll be job losses and that’s of concern, plus less competition.
So am I reading this right. Octopus are now going to become and internet service provider?
Seems not, but I feel sorry for the poor soles if they end up with Vodafone and maybe Sky.
Why do these ISPs keep handing the business on? If there is so little profit in the game, why do we have companies laying new cables everywhere? Octopus say on their website that they don’t make a profit from energy. If they don’t make a profit from energy or broadband, why do they get out of bed in the morning? Smart meters make it possible for your energy use to be reduced or cut off remotely. I think it’s all part of the ‘Great Reset’. See your local King for more info.
Are you sure about that?
All I can see is Octopus saying that they buy some of their energy from community cooperatives that reinvest profit.
Shell are looking to get rid of the whole Shell Energy operation, including broadband, and that’s because it was a failed bet on diversifying from fossil fuels. In fossil fuels, IIRC Shell franchise the filling stations, the real Shell business is developing upstream oil and gas reservoirs, and the processing, trading and logistics of the products. Recognising that the fossil fuel business will in time shrink, they concluded that being in retail electricity (and for a good few years retail gas) was the world of the future. The bought First Utility and rebranded it Shell Energy. As part of the expanded customer offer they offered broadband, partly to make extra money, but also hoping to increase tie in and reduce churn.
Even so, what any large supplier would have told them beforehand turned out to be the case, that the margins in downstream energy supply are pitiful, and regulation capricious and unpredictable. They realised the folly of this venture, and abandoned the idea, to focus on other ideas. That’s why Shell Energy and its ISP customers are for sale.
Talktalk are for sale simply because they focused on budget customers and were poorly managed, and have found that despite trying everything they can’t make money at the prices those customers are willing to pay; Having built a business to be as cheap as possible, they then have a reputation and brand that trap them from challenging for higher paying customers, yet still have to high marketing costs to replace customers who churn out. You might ask why bother? That’s what investors have indeed thought, and that’s why TT are being broken up. The fate of the circa 3m TT broadband customers remains to be seen.
If indeed there is a god, please, NOT Octopus Group, I agree with Anon32, in my experience they can not even correct problems of their own Octopus Group making, 18 months and counting!
I should have added, and I am not even a customer of theirs!
CEO of Fern Services Limited (and thus Cuckoo etc) is Paul Hellings, former CEO of Shell Energy UK Ltd