Incumbent telecoms operators are common sufferers (or culprits, depending on
your point of view). To diagnose, compare a company’s average revenue per
user (Arpu) to current tariffs. If it reaps a lot more from its average
customer than it charges new ones, it is probably leaning on existing
customers stuck on outdated and pricey plans.
This is an unsustainable source of revenue: even the laziest customers are
likely to discover they are paying over the odds before too long.
Triple play
Barclays Capital has crunched the numbers on telecoms incumbents in Europe,
where customers are signing up to “triple play” packages that bundle
together phone, TV and broadband services. The findings could spell trouble.
France Telecom, for example, charges about €35 a month for its triple play
package, about in line with local competitors, but its Arpu plus line rental
is more than €50 a month. Deutsche Telekom also looks out on a limb.
Goody-two-shoes Portugal Telecom, meanwhile, has an Arpu well in line with
triple play pricing.
Cheeper bundled plans
Fixing a pricing mismatch is not easy. Telecom Italia had a go this year with
its mobile customers, many of whom were on expensive plans and in danger of
leaving for competitors. It persuaded millions to switch to cheaper bundled
plans with the help of promotions. Consumer loyalty and usage improved but
the “cannibalisation spike” (as TI put it) helped reduce domestic revenue by
8 per cent in the latest half-year. TI urged investors to think of that as
an investment of sorts in a more sustainable customer base. But many took it
as a nasty surprise.
Incumbents can sometimes get away with charging more than peers, particularly
if they can be seen as offering significantly better service and product
quality. Charging more than themselves, though, is a dangerous game
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