Italian mobile prices fall ahead of Iliad arrival

Friday 16 June 2017 | 14:51 CET | Background

The merger of Wind and 3 Italia and the upcoming arrival of Iliad in Italy are already causing waves in the Italian mobile market. The total costs of ownership (TCO) for postpaid plans in Italy were down considerably in Q1 2017 from a year earlier, according to the latest research from Telecompaper.

The feared rise in prices from mobile markets consolidating to three from four operators appears to have been avoided, helped in part by Iliad acquiring assets from Wind and 3 in order to launch a new provider in Italy. The other operators are not waiting for Iliad to launch, after the operator already showed what it could do in the French mobile market.  TIM has started its own low-cost second brand, Kena Mobile, at the end of March and Vodafone is planning a similar offer.  

Even prior to the launch of the new low-cost brands, we found a clear drop in postpaid prices in Italy in our EU Mobile Benchmark report for Q1 2017. The analysis calculates a total cost of ownership (TCO), which includes the monthly fee, any connection or other fees and any promotions. Of the 16 Western European countries researched, Italy ranked among the cheapest, compared to previously showing variable pricing. 

For Sim-only plans in Italy, all but one of the monthly price ranges showed a lower TCO than the year before. The drop in Sim-only was especially big for the largest type of plan analysed, with at least 1,000 minutes and more than 10GB per month. This declined to a median price of EUR 18 per month from EUR 43 a year ago. For plans with 360-1,000 minutes and 5-10 GB per month, the decrease was also quite significant, going from EUR 28 to EUR 10. This drop was due to 3 and Wind introducing plans at a low price, while previously only Vodafone offered one plan in this range at a higher price. 

Fewer plans on offer compared to last year

Overall the number of plans in Italy fell in the past year. Sim-only offers on the market dropped to 22 from 34 a year ago. This was mostly caused by Vodafone and Wind changing their portfolios and reducing the number of plans on offer. This reduction in plans has also led to Italian consumers having fewer ranges of minute and data volumes from which to choose. 

In France, Iliad only offers two plans, and we expect it to keep it clear and simple in Italy too. The Italian operators are already working on making their propositions clearer, so consumers can compare more easily the offer once Iliad arrives. 

Our mobile pricing analysis also shows some other areas where operators may want to look. Italy is clearly one of the cheapest countries now in Western Europe for plans with more than 1,000 minutes and various ranges of data. For example, a plan with 5-10GB and more than 1,000 minutes a month will cost a customer in Germany 217 percent more than in Italy, while only in France do consumers pay less, with a median price 6 percent below Italy, as can be seen in the graph below.  

However, Italian consumers wanting more than 1,000 minutes with 1GB or 1.5GB cannot choose such a plan, as it isn’t being offered by the main operators. They will need to take out a plan with more data than they actually need. 

Changes to portfolio likely with arrival of Iliad and new low cost brands

Although Wind and 3 Italy have merged, the two brands are still being marketed separately. Wind changed its portfolio in favour of cheaper plans, and its most expensive plan now costs just EUR 20 per month. However, it no longer offers a plan with more than 10GB, with 5GB being its biggest volume available (in a monthly plan, as add-ons are possible to buy). Vodafone has also shifted to cheaper and fewer plans, with no longer any plans costing more than EUR 50 per month. 

All in all, Italian consumers can pay much less for their mobile plans than a year ago, if they choose wisely. The drop in prices has not yet hit operators’ revenues, as many customers are still on older offers. Telecompaper’s Italian database shows mobile service revenues were largely stable (+0.2%) in Q1 2017 compared to same period last year.  

The change in pricing should start to have a greater impact in the quarters to come as more customers migrate to the new offers. More portfolio changes are also likely, as Wind and 3 complete their integration and the new low-cost brands are developed. Furthermore, Iliad may also have to rethink its French strategy, as it does not benefit from an established fixed customer base to cross-sell to in Italy. 


Footnote: the EU Mobile Benchmark report is based on postpaid plans but in Italy we include the hybrid plans marketed as prepaid because of the extra tax charged on postpaid plans in Italy.

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