Ever since Iliad’s Free Mobile pulled the rug from underneath their competitors by offering unlimited voice, messaging and 3GB of data for 20 euros, we have been waiting for the response. France’s number two operator, SFR, has now dropped its prices by 10 euros, according to Telecom TV. This is about as low as they go before margins are so slim that investment suffers.
It is also completely upside down. If the industry is on the brink of believing that customers want value not just cheap stuff then surely a better response would be to apply warm marketing towels to the head and come up with cool bundles. Short term price wars only damage the combatants. If investment is damaged, quality will suffer, customers will complain and churn, revenues are therefore hit, which means further ‘efficiencies’ and so the cycle will go on.
There are more and more examples of value based pricing appearing – TDC in Denmark famously bundled music and voice but there are many other examples emerging, operators leading with content or security or service passes, as well as Happy Hours and child safety linked to real time controls.
With value emerging as the way forward for both operators and customers it is sad that a price war is the response from some. This situation is only made worse when you factor in bandwidth hungry services such as video. If operators are going to be squeezed by providers on the one hand and by competition on the other, it will not be good – for anyone.