Portuguese Consumers Unhappy with Prices for Mobile Telephony Services

Portuguese Consumers Unhappy with Prices for Mobile Telephony Services

According to a report issued last week, 49 percent of Portuguese consumers think they are paying too much for mobile telephone services. Considering that Portugal boasts the lowest average charges per month in Western Europe, this level of dissatisfaction bodes ill for mobile providers throughout the region, who will likely face an upsurge of mass “bill shock.”

At the same time, some innovative developments in value added service offerings have appeared in the mobile marketplace which we believe could mitigate subscribers’ frustrations with the size of their mobile bills while still enabling operators to grow ARPU. For example, KPN Belgium (Base) and music streaming company Spotify have teamed up to launch the Base Check 25 bundle, which, for €25 per month includes the Spotify Premium Service (valued at €9.99 a month, giving access to some 18 million songs), 2 GB of data, unlimited texts, and 150 minutes to all networks within the country.

In a similar approach, Telenor Hungary has partnered with EUB of the Generali Group to enable subscribers to take out travel insurance easily via SMS. The package also includes various travel-related assistance services accessible by text. And in the disputed Georgian territory of Abkhazia, Aquafon is offering its subscribers news updates via SMS for a small extra charge per day.

Tarifica’s Take

We are seeing a firm downward pressure on prices for traditional mobile services, especially with regard to the core capabilities of voice and text messaging, as evidenced by the situation in Portugal. We fully expect subscription prices for such basic services to trend lower and lower, in response to widespread customer dissatisfaction with current levels and the continuing emergence of new competition. This will likely make it more difficult for operators to create traditional service bundles that are profitable or which lead to growth, considering the low perceived value of voice calling and text messaging in the current market climate.

To foster continuing revenue growth and respectable margins, providers will have to offer ever more value to consumers. To do so, they will need to emulate Base, Telenor and Aqufon – by providing subscribers with a menu of innovative commerce- or entertainment-oriented services for which they can charge separately from other services, in particular voice, text and data. We recommend that operators take the “a la carte” approach, as far as is possible, enabling customers to pick and choose the unique, higher value services that meet their needs.

In order to create these services, providers may need to partner with other entities that have expertise and experience in the relevant areas of technology, content and commerce. As we have been stressing for some time, innovation and flexibility are key if operators want to stay healthy in this fast changing telecom world.