Vodafone Spain has cut the tariffs of its 2GB and 5GB mobile data packages by up to 25 percent. The lower rates are available to both new and existing subscribers effective January 30.
We are not surprised that Vodafone is reducing prices, given Spain’s unemployment rate reached a record high of 26 percent last week. MNOs realize that mobile phone service is largely a commodity and that, as such, its pricing is not inelastic. People will almost certainly cut back on mobile service if they have to tighten their belts, making price cuts a logical strategy for retaining customers. In light of the economic difficulties in Europe, we wouldn’t be surprised to see similar price slashing occur elsewhere on the continent.
One approach we favor that MNOs with extra cash on hand could take to mitigate such economic risk is to diversify by making investments in other operators and/or related technology companies in other countries and regions. Such investments would not have to be very large in order to be meaningful. We suggest this course of action, especially for those providers in the hardest-hit economies, as well as those in economies that are teetering on the edge, if they can afford to take it.