KPN revamps subscription concept, competition may follow

Thursday 5 July 2012 | 13:52 CET | Market Commentary
KPN has revamped its consumer subscriptions. The same as at Vodafone in April, the new plans split voice/SMS services from mobile data and offers unlimited on-net calls. In addition, KPN has separated the subscription from the handset and introduces, the same as its other brands Hi and Telfort, a handset lease option. Apparently the results of the new phone strategy have been good enough at Hi and Telfort that the operator is rolling out the concept for its main brand. According to KPN, the USPs of the new plans are transparency (on what customers pay) and the possibility to choose one's own handset. 

KPN is rolling out the lease concept quickly; Hi started in March and Telfort followed in April. One can assume KPN tracked customer reactions and sales figures closely since then, as the company is taking a big risk if the lease model doesn't catch on. Telecompaper also followed customer reactions, and these were not always positive, but this may just be due to the novelty of the concept. On the Hi forum, the majority of users were negative about the proposition. 

The subscriptions themselves appear pretty good at first glance: EUR 6 per month for 100 minutes/SMS, rising to EUR 30 for unlimited calls. However, the customer must also take an 'instap' (entry-level) plan for EUR 10 per month, the same as Telfort requires. This plan includes the unlimited on-net calls. In the end this means that 100 minutes at KPN costs EUR 16 per month - not really a competitive price. At Vodafone for example a Sim-only plan with 100 minutes costs EUR 5 per month. The data bundles start at EUR 10 for 250MB and also include 1GB for EUR 15 and 2.5GB for EUR 25. This in line with the current market offers, if it weren't for the fact that the customer still has to pay the extra EUR 10 per month at KPN. 

Looking at the lease construction, it's questionable whether customers are better off. As with cars, a lease always costs more than a direct purchase. For consumers who can't come up with the cash though, it's probably the best solution. An example: the iPhone 4S 16GB costs EUR 640 bought on an online shop. At KPN, it costs EUR 28 per month with a two-year subscription. Times 24, that's EUR 672, plus whatever residual value remains for the phone, which according to KPN is 15 percent of the original price, for a fair comparison. It should be noted that KPN also includes a repair and replacement service with this (but theft/loss or own damage is not covered).

KPN appears to be targeting a minimum income from each customer. It appears that call minutes, which previously accounted for the bulk of revenue for operators, are no longer the most important to this. By introducing an unlimited call/SMS option, KPN is trying to maker calling and SMS popular again, just as a few years ago the operator gave a push to mobile data use by introducing cheap unlimited plans. The question remains whether this is interesting for all its customers, especially as young people are already converted to Whatsapp and Facebook instead of just calls. For EUR 30 (or actually EUR 40), the customer can get whatever he wants. 

The prices are actually good, but that extra EUR 10 KPN charges for the instap plan is not worth much. The on-net minutes will be nice for a few customers, but most people have no idea which network the people they call use. Unlimited on-net calls can thus hardly be used as a USP. 

The competition has always followed KPN, and it will likely only be a question of time before they also offer a lease construction. All the operators have already been saying for years they'd like to get rid of subsidies as much as possible. For prepaid, this is already largely the case. However, for consumers, abandoning the current model is still a big change. Before, you got a free phone with often another free gift included, and the costs were integrated into the subscription fees. 

The new lease construction does offer, as KPN says, more transparency, but the general conditions could be presented more clearly. The other operators T-Mobile, Vodafone and Tele2 will likely take a 'wait and see' approach before any changes to their own propositions. They may continue with their current plans or try and come up with a third way - the hope is that whatever it is, they offer some clarity on prices to consumers. 

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