European mobile pricing: time for data to go unlimited

Friday 26 May 2017 | 08:41 CET | Market Commentary
The European mobile market appears set to break through a key barrier: moving from set data bundles to truly unlimited data plans. While Asian markets like Japan have had unlimited data for years and T-Mobile drove the US market in the past year to embrace unlimited everything, Europe saw most unlimited data offers disappear with the advent of 4G. Operators wanted to cash in on their network investments and reverted to charging more for data, with only a few lucky subscribers holding on to old plans with unlimited data.

This is now changing, with a number of European operators changing their pricing in recent months. Already in Q1 2017, Telecompaper’s EU Mobile Benchmark report found that the share of postpaid plans with unlimited data has increased notably compared to a year ago. While these were already common in Finland and Switzerland, operators in the Netherlands and Germany also started unlimited offers during the period.

More and more data

In general, data plans are only getting bigger and not a day goes by without some provider announcing bigger bundles, often with no increase in price. In Telecompaper’s Q1 comparison of prices in 16 European countries, we found that 36 percent of plans with a high-end smartphone come with more than 10 GB a month and 28 percent of Sim-only plans. That compares to respectively 27 percent and 21 percent a year ago. There are also a greater share of plans in the 5-10 GB range and increasingly fewer plans available with no data.

Going unlimited

The trend has accelerated in recent months with a number of announcements of new offers. Tele2 has been the first to embrace unlimited data with launches across its footprint – in Sweden, Croatia and and the Baltics. T-Mobile Netherlands appears to have anticipated Tele2’s strategy and beat the company to the punch with a launch of unlimited data in January. Tele2 Netherlands followed in May, undercutting T-Mobile’s offer by EUR 10.

T-Mobile Netherlands’ unlimited data offer followed a similar pattern to its US sister company, starting first with zero-rated data for streaming music and soon after introducing full unlimited data. Deutsche Telekom appears to be reserving this strategy for its ‘challenger’ markets (also Poland); in countries where it’s the incumbent, such as Germany and Croatia, it’s so far only offering zero-rated data for certain applications.

Free, which already broke open the French market with big bundles for low prices, made in March its flagship plan unlimited. The other French operators responded with an increase in their data allowances, mainly on high-end plans, and SFR introduced unlimited data for high-spend customers. Italian operators appear to be taking note ahead of Free’s planned arrival there, as the Telecompaper Q1 report recorded a clear drop in prices in Italy in Q1 compared to a year ago. We expect this may be the next market to go unlimited, once Free launches late this year.

Challengers and ARPU

The trend towards unlimited data is not surprisingly being led by alternative operators, such as Tele2, Free and in some markets 3. Incumbents like Deutsche Telekom are more cautious, testing the waters in countries where they are not market leader, for example as Telenor is doing in Hungary. This suggests that for the moment, unlimited data is a way to win market share, not necessarily to grow ARPU and revenues.

However, in the longer term we expect more operators will turn to unlimited data as a way to increase ARPU. The ‘freedom’ of unlimited data and fear of overage charges can help drive customers to a higher priced plan, as T-Mobile US has shown. It took T-Mobile barely six months to convince the other major American operators to start offering unlimited data or risk losing all their high-ARPU customers.

In Europe, the general trend in mobile prices and service revenues remains downwards, due both to regulation, such as cuts to termination rates and roaming caps, as well as intense competition in saturated markets. For the biggest plans on the market, with over 1,000 minutes and 10 GB, Telecompaper found the median price for Sim-only fell year-on-year in 11 of the 16 countries researched in Q1. 

Voice and SMS are already commodities, sold as unlimited on an ever-growing number of plans and offering little hope for revenue growth amid the competition from OTT apps. If operators want to grow ARPU and revenues, they need to push customers to more expensive all-in plans, and unlimited data is the next logical step. Furthermore, once 5G speeds arrive in a couple years, few consumers will be willing to settle for a gigabyte bucket any longer.  

For more information on mobile pricing trends, check out Telecompaper's latest EU Mobile Benchmark report with all the latest figures and analysis.  

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