T-Mobile is looking to shake up the Dutch market by abandoning its data caps. Two of the five new subscriptions in its Go series of plans offer unlimited data (also in the EU and optionally the US). What's unclear is what it's trying to achieve. It's previously said it wants to be the biggest mobile-only provider, but it is already. No concrete targets were provided.
It's clear the company wants to grow, both its customer numbers and ARPU. Given the current market situation, in which newcomer Tele2 appears to have held off with any particularly disruptive offer, T-Mobile has a good chance of realising structural growth. Some skepticism is appropriate though, as both VodafoneZiggo and Tele2 also have growth ambitions, even if it's highly questionable whether they will follow T-Mobile's taboo-breaking offer. No doubt though, there are some small signs of panic in the board rooms right now.
Taboo
T-Mobile Netherlands has positioned itself as a challenger, and despite the recent acquisition of Vodafone's fixed business, a mobile-only player. There is no sign yet of any converged offering. Setting aside the question of whether Deutsche Telekom wants to sell the Dutch unit, the management still needs to maximise the company's value. In the current market, the operators match each other and maintain the state of play. Surprisingly enough, the semi-newcomer Tele2 is doing the same. In that sense we don't take Tele2's target of a 20 percent revenue market share very seriously.
Many plans already offer unlimited calls and texts, but the Dutch operators have steered clear of unlimited data. As demand increases, data allowances are increased at regular intervals, but we are still far from a point where caps no longer have any impact. In the fixed broadband market, where there are no caps, average use ranges from 100 to 200 GB per month. In mobile, the biggest data plans to date have been Tele2 with 24 GB per month and Vodafone with 25 GB. Dropping such caps is clearly breaking a taboo.
T-Mobile can expect a boost in ARPU, and the end to data caps will mean a structural change in the market. Price increases, differentiation and innovation will need to be realised in other ways.
Capacity
T-Mobile NL sees an opportunity to disrupt the current balance in the market. As KPN grabbed an advantage by building its 4G network even before the spectrum was auctioned, T-Mobile now has a chance to build on its network capacity to lead the new world of no data caps. This is what the management says at least, and sufficient capacity is clearly needed if the operator doesn't want to be a victim of its own success. As customer numbers (per cell) increase, speeds will fall, but until the opposite is proven, we assume that T-Mobile has invested enough in network densification and fibre backhaul.
ARPU
A superior experience, extensive coverage, high speeds, no need to rely on 'lousy Wi-Fi' (in the words of T-Mobile NL) and above all an end to overage fees are the recipe for T-Mobile's expected growth. It's based in part on its sister company T-Mobile US, where the company recently launched the similar T-Mobile ONE offer. T-Mobile US has been extremely successful with its 'Un-carrier' strategy ("Ladies and gentlemen, T-Mobile has left the clueless-cellular-company building"), of which ONE forms part. The US operator, which also was once up for sale, is steadily growing its market share and contributing more and more to Deutsche Telekom's results. The German company can be expected to try the same strategy in other countries where it's positioned as a challenger, such as Poland.
The Go Unlimited offer in the Netherlands is expected to attract not only new customers, but also subscribers on cheaper plans attracted by the 'worry-free' aspect of unlimited data. This supports T-Mobile's forecast of higher ARPU from the new deals.
Still, we should keep in mind that only 12 percent of Dutch consumers have a plan costing EUR 30 or more per month and the bigger data bundles have a limited audience. According to data from the Telecompaper Consumer Panel, only 20 percent of subscribers with a data bundle have 4 GB or more per month.
Response
It's uncertain how the competition will respond to T-Mobile. Subscriptions costing more than EUR 35 per month are now worthless. Will KPN and Vodafone follow T-Mobile? Is Tele2 able to follow, given its disadvantage in terms of capacity and infrastructure? This could even drive Tele2 into the arms of T-Mobile, as the limits on mergers of 4G licenceholders will soon come to an end. Another question is whether T-Mobile will allow MVNOs on its network to offer similar plans - are they partners or competitors?
Iliad (Free) shook up the French market when it launched as the fourth operator. Prices fell, managers were replaced, jobs lost and one operator (Bouygues Telecom) was almost divided up amongst the rest. All the operators all of sudden found ways to cut costs across their business. The question is whether T-Mobile's Go Unlimited will have such a dramatic effect on the Dutch market, where price levels are already well below the US and still above those in France. There's no doubt though that the boards of KPN, VodafoneZiggo and Tele2 are now working furiously to come up with a response.
