Friday, May 2, 2014

Spanish Consumers Unite to Lower Rates for Mobile Services

Spain’s Organization of Consumers and Users (OCU) has set in motion a collective purchasing initiative by encouraging consumers to unite in order to negotiate lower rates for mobile services. Consumers can sign up for the auction, to be held on 22 May, through a website set up for the purpose. Consumers will have to provide details of their usage of voice and data services, which will then be used to create 25 profiles for operators to bid on. The consumers will be grouped into two profiles—high-usage and low-usage—and the best average rates for the high and low profiles will be calculated to determine the winning operators. Following the auction, consumers will receive the winning offer that best suits their profile and will have the option to accept the offer or keep their existing plans. The contracts will be for one year, and consumers will have the option to terminate their contracts with no penalty before the year is over. The offers will only be for standard mobile services and will not include roaming, international or premium services. Fixed line services (voice or broadband) will not be included.

Spain, one of the largest mobile markets in Europe, has recently been experiencing massive changes in retail offerings due to the extensive impact of the economic recession. With one in four people unemployed in 2013, Spanish consumers in record numbers preferred to give up their mobile phones or switch to cheaper options offered by smaller players such as Yoigo and Simyo. These players made game-changing moves such as offering unlocked smartphones, while others such as MVNOs Ono and Jazztel introduced converged offers which made the most of customers’ desire to save. Prompted by the aggressive moves of their smaller rivals as well as pressure on their own margins, Movistar, Vodafone and Orange eliminated subsidies on handsets while introducing installment plans for new smartphones and buy-back options for old phones. Orange and Movistar even offer unlocked smartphones. Prices also declined; for example, the average monthly bill for mobile services in Q3 2013 was 10 percent lower than in Q3 2012. Despite these moves, according to a study, 19 percent of Spanish mobile subscribers claimed to be dissatisfied with their mobile service.

Spain, to a large extent, exemplifies the situation in Europe. Incumbents, who invested heavily in acquiring spectrum and rolling out 4G networks, have had their ambitions to charge more for 4G services frustrated due to offers of free 4G services from smaller rivals. Consumers’ reluctance to spend on mobile services has also led to measures to prevent bill shock, such as data caps and alerts, as well as the forthcoming elimination of roaming charges in the EU and in some cases the elimination of two-year contracts. Some of these moves have been initiated by regulators, others by operators.

The OCU’s move to hold an auction to source lower mobile tariffs can be understood in terms of this trend. The question is, how successful will it be? In 2013, the OCU held a similar process to procure lower electricity tariffs for retail consumers. It signed up nearly 500,000 consumers, but only got one energy company, a small player called, to submit a bid. The auction finally led to savings of €49.00 (US $67.84) per year for the 28,000 consumers who chose to sign up for the winning bid. In the case of mobile services, the OCU hopes to attract 150,000 consumers (it had 48,893 signups at the time of writing). While larger players may be reluctant to participate, the auction may attract participation from the smaller MVNOs that can take advantage of the opportunity to sign up a large number of customers at relatively low cost. So while this auction may not be a game changer, it may be one more step toward an even more competitive market in Spain.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues:

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