3GScottishUser
27th August 2006, 10:41 AM
From The Sunday Times (27/08/2006):
VODAFONE is expected this week to cut the cost of mobile-phone bills with a new contract tariff.
It is understood to have been trying out the tariff in some of its high-street outlets. For higher-spending customers, it is likely to offer savings of 30% to 40% a month.
The tariff is partly a response to the success of Flext from T-Mobile, which has attracted 800,000 customers since its launch in March. But it will also be seen as a recognition by Vodafone of the increasing pressure on prices in the mobile industry.
Flext allows customers to spend their monthly allowance on voice calls, texts or picture messages, adapting automatically to changing usage patterns and thus avoiding the wastage of unused minutes. Vodafone is thought likely to offer a similar package.
Vodafone’s move comes as research from JP Morgan, the investment bank, suggests that the company remains substantially more expensive than its principal competitors. Jeremy Dellis, the JP Morgan analyst, said the worst disparities were in Germany, a key market.
JP Morgan estimates that for higher-spending contract customers Vodafone is more than twice as expensive as E-Plus, a smaller German rival, and 18% more expensive than T-Mobile. Vodafone disputes these figures.
Dellis said the price cuts of 30% to 40% being looked at by Vodafone in the UK were needed just to bring the company into line with T-Mobile, Orange and O2.
He said the UK trials suggested that Vodafone “may now privately acknowledge the magnitude/longevity of industry price deflation ahead. Vodafone’s public view as recently as last month — that rivals would ease back on pricing within 12 months — was undermined by T-Mobile’s decision to pursue price leadership in the German contract (market).”
He added: “Widespread cuts in Vodafone’s European tariffs to levels more in line with (its) peers would significantly dilute growth and margins in our view.”
Fears of gathering price competition have acted as a drag on Vodafone’s share price, which remains only just above 110p despite the company having returned billions of pounds to shareholders.
Some analysts expect mobile companies to face the same collapse in prices for voice calls that has been endured by fixed-line companies such as BT. Despite hopes for 3G “data services”, Vodafone remains heavily dependent on voice calls.
On Friday, Vodafone agreed the £1.4 billion sale of its 25% stake in Proximus, the leading Belgian mobile company. The stake has been bought by Belgacom, which already owned the majority of the business.
Vodafone’s stake in Swisscom is also expected to be sold.
http://www.timesonline.co.uk/article/0,,2095-2330117,00.html
VODAFONE is expected this week to cut the cost of mobile-phone bills with a new contract tariff.
It is understood to have been trying out the tariff in some of its high-street outlets. For higher-spending customers, it is likely to offer savings of 30% to 40% a month.
The tariff is partly a response to the success of Flext from T-Mobile, which has attracted 800,000 customers since its launch in March. But it will also be seen as a recognition by Vodafone of the increasing pressure on prices in the mobile industry.
Flext allows customers to spend their monthly allowance on voice calls, texts or picture messages, adapting automatically to changing usage patterns and thus avoiding the wastage of unused minutes. Vodafone is thought likely to offer a similar package.
Vodafone’s move comes as research from JP Morgan, the investment bank, suggests that the company remains substantially more expensive than its principal competitors. Jeremy Dellis, the JP Morgan analyst, said the worst disparities were in Germany, a key market.
JP Morgan estimates that for higher-spending contract customers Vodafone is more than twice as expensive as E-Plus, a smaller German rival, and 18% more expensive than T-Mobile. Vodafone disputes these figures.
Dellis said the price cuts of 30% to 40% being looked at by Vodafone in the UK were needed just to bring the company into line with T-Mobile, Orange and O2.
He said the UK trials suggested that Vodafone “may now privately acknowledge the magnitude/longevity of industry price deflation ahead. Vodafone’s public view as recently as last month — that rivals would ease back on pricing within 12 months — was undermined by T-Mobile’s decision to pursue price leadership in the German contract (market).”
He added: “Widespread cuts in Vodafone’s European tariffs to levels more in line with (its) peers would significantly dilute growth and margins in our view.”
Fears of gathering price competition have acted as a drag on Vodafone’s share price, which remains only just above 110p despite the company having returned billions of pounds to shareholders.
Some analysts expect mobile companies to face the same collapse in prices for voice calls that has been endured by fixed-line companies such as BT. Despite hopes for 3G “data services”, Vodafone remains heavily dependent on voice calls.
On Friday, Vodafone agreed the £1.4 billion sale of its 25% stake in Proximus, the leading Belgian mobile company. The stake has been bought by Belgacom, which already owned the majority of the business.
Vodafone’s stake in Swisscom is also expected to be sold.
http://www.timesonline.co.uk/article/0,,2095-2330117,00.html