Vodafone Italia announced this week that it will increase prices for some of its consumer subscription data SIMs by EUR 1.99 (US $2.18) per month from 09 May. The company said the price increase is needed to support continued investment in its network in the face of increasing traffic demand. If customers choose not to accept the price hike, they may cancel the contract within 60 days, with no penalty.
Over the past few years, in an effort to incentivize reluctant customers to upgrade, many mobile operators have been offering 5G network access at no extra charge. However, as the rollout of 5G networks continues, this strategy has left many operators in a dilemma: they need to raise prices to recoup their investment in 5G, but doing so risks losing customers who have become accustomed to 5G service at 4G prices. This has led to a cycle of perpetual extensions of free 5G access, with every operator in the same market afraid to be the one to make the first move. Case in point is Portugal, where mobile operators Nos, Altice (Meo) and Vodafone have just announced another extension of free 5G usage until 30 September, kicking the can down the road once again.
But Vodafone Italy’s recent move might provide a way to break the cycle. What sets Vodafone’s approach apart is the way it handles customers who don’t accept the price hike. Vodafone is being transparent and honest about its need to pay for continued investment in its network, and giving customers 60 days to cancel their contract without any penalties. In this way, the operator demonstrates acceptance of the possibility of customer loss, but also conveys a level of confidence – Vodafone has to do what it has to do, but it isn’t going to penalize customers for doing what is right for them. Yet, by implementing only a modest price increase, Vodafone is also betting that the hassle of switching providers might be more inconvenient for customers than paying an extra few euro each month.
It remains to be seen if this approach will be successful. Yet this is a clear departure from the indecision common across the industry when it comes to raising prices for 5G. Being transparent and giving its customers an out may allow Vodafone Italy to keep its company image intact while potentially minimize customer churn. If nothing else, it’s a step towards moving past the can-kicking and finding a sustainable way forward for 5G pricing.