iPhone 5 debut in Europe may trigger new price competition
The eagerly awaited iPhone 5 is debuting in Europe at a fascinating juncture. In markets like France, major price wars broke out earlier in 2012 as challenger operators began experimenting with new price plans. Strong early demand for the iPhone 5 may well spur further pricing experimentation aimed at luring in consumers unhappy with the old smartphone plan prices.
We’ve seen some radical new pricing approaches debut this year from France to New Zealand and South Africa. There is a distinct possibility the experimentation will spread to new countries in coming quarters. For consumers, comparing different phone plans and finding the best fit for personal usage may well become an even thornier challenge in coming months.
In France, Iliad has triggered a minor earthquake. The challenger operator grabbed more than 5% of France’s mobile market in less than six months by introducing a 20 euro plan. One of Iliad’s main selling points is offering the possibility to terminate the phone contract at any point. The downside of this approach is the high cost of purchasing the smartphone, which is not subsidized by the operator. Yet more than 25% of French contract customers have now migrated to such plans, showing there is real demand for unsubsidized contracts.
In New Zealand, a similar skirmish is taking place – a discount operator called Skinny has pioneered $4 weekly plans and a $19 monthly plan, dragging the leading carriers with it to a vicious price war. In South Africa, the price of mobile data plans has recently plunged to as low as $11 per 1 GB.
iPhone’s European market share may well hit 25% by Christmas and it has the potential to reshape operator pricing strategies in a profound way. In most European markets, mobile subscriber growth has stalled or even gone into reverse – markets such as Spain are now posting mobile sub declines. Smartphone sales growth has started slowing, possibly dropping below 30% in Europe in 2H12. The lack of subscriber growth is creating an environment where smaller carriers are tempted to attack leading operators by price aggression in order to gain market share.
Keeping up with the new mobile phone plans is going to occupy consumers over the next winter, particularly if the French-style plans with no long-term commitments take root.
