T-Mobile still offers lowest price per GB

Monday 25 May 2015 | 15:03 CET | Background

The strategy of any telecom operator can be summed up in the quest for increasing ARPU. The same is true for fixed and mobile operators. The big taboo is 'commoditisation' of the product, which could 'spoil' the market. Only a handful of operators worldwide have chosen a strategy based on commoditisation, such as HKBN in Hong Kong (known for the slogan 'we are out to commoditise bandwidth') or Sonic.net in California. Most of the rest of the world steers clear of this, in order to maintain their pricing power and healthy margins. The same is true in the Netherlands. Only the competitive factor can push prices lower. 

If we take a simplified view of the matter on the Dutch mobile market, the outlook is not good. There appears to be a great deal of 'air' or 'excess profit' in the tariffs. Only a true challenger, supported by a superior network (with low costs, such as LTE) and the willingness to accept losses in the expansion phase, could take the 'air' out of the market.

Our analysis looks at a sub-section of the market: SIM-only packages with a set price for unlimited calls and SMS. This allows us to isolate the cost of data. Whether one likes it or not, calls and SMS are really already commodities, with a current base price of EUR 10 per month in the Netherlands (at Tele2 and Youfone). For a more comprehensive comparison of prices, our semi-annual EU Benchmark report looks at the total cost of ownership instead of just the monthly access fee, while also correcting for differences in purchasing power.

Below we show the prices of the largest data bundles. These assume a SIM-only, 24-month contract with a fixed price for unlimited calls and SMS (with small variations at a few providers). Note that additional costs may apply, such as activation, 4G access, unlimited calls/SMS etc. By raising these prices, a provider can keep its 'headline' prices for data lower. This is true at T-Mobile, which has the lowest price per GB at EUR 1.71, in its monthly bundle of 12 GB. T-Mobile also scored best in our analysis a month ago, but with a higher rate per GB, of EUR 2.05 in a bundle of 10 GB per month.

  Largest bundle €/GB Unlimited
Other  Activation
Telfort (mobile only) 2.5 GB for 20 € 6.67 16 max. 1,000 min. 10 5
Telfort (quad play) 5GB for 17 € 3.40 16 max. 2,000 min. 0 5
Simyo 4 GB for 25 € 6.25 15 max. 1,250 min or SMS 15 5
Youfone 4 GB for 25 € 6.25 10 4G from 1.5 GB/mth 10 0
T-Mobile 12 GB for 20.50 € 1.71 19 incl. extras 15 0
Ben 2.5 GB for 19 € 7.60 14 4G from 1.5 GB/mth 15 0
Simpel 3 GB for 12.50 € 3.17 15
15 10
Tele2 4 GB for 25 € 6.25  10  no fixed contract, 3G or 4G 10 0

While T-Mobile may have the lowest price per GB, it is clearly subsidising this by charging the highest price for unlimited calls and SMS, at EUR 19 per month (although some other services are included in this). Its activation fee of EUR 15 is also relatively high.

The price per GB varies considerably across providers. The bigger the data bundle, the lower the price per GB. The highest price per GB is at Telfort, which offers 125 MB for EUR 4, equal to EUR 32 per GB. We have no doubt that even larger bundles will be introduced in the coming months, pushing the price per GB even lower. In Sweden we found a tariff at EUR 0.42 per GB (Tele2, in a bundle of 100 GB), which suggests further room for price cuts in the Netherlands. The question is only how low competition will push prices. Transit fees are just cents per GB, but operators will want to maintain a minimum return and margin on their investments.

For topping up with more data once a bundle has been used up, customers in the Netherlands pay as much as EUR 7.50 per GB at KPN or even EUR 15 at Vodafone. These prices appear unsustainable (not to mention those charged for international roaming), assuming market competition is working as expected. 

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