Bottom line is key for EE’s 4G service

Bottom line is key for EE’s 4G service

The headstart begins now. At the weekend EE will launch a new TV ad, part of a multimillion-pound campaign, to promote its 4G service that launched earlier this week. The advert will focus on the speed of the new service, which is up to five times that of normal 3G, and offering unlimited calls and texts.

But the launch has not been seen as the hugely aggressive acquisition spree that some expected and its rivals feared. EE has until the spring, the earliest its rivals can launch their own 4G services, to mop up those wanting to sign a next generation contract. But it looks like it is focusing on the bottom line rather than a straight acquisition play. The most expensive plan is £56, which includes 8GB of data. Almost all of the contract plans require an upfront payment for the handset.

Phil Kendall, director of global wireless practice at Strategy Analytics, argues that the pricing positions the operator as an ‘aspirational brand’. He said: ‘EE could have gone for broke as it had an eight-month window to lock in customers or it could have gone for profit building. It has clearly gone for the latter. It looks more like an exercise in establishing brand and making money, rather than taking money off its competitors.’

Adding customers

Marc Allera, chief sales officer at EE, says the operator is looking to take ‘as many [customers from their rivals] as they can’ but also notes the financial realities of the rollout of 4G. He says the company is spending some £1.5m daily on its network and will look to extend the 4G network by 2,000 square miles per month. He is also refusing to put a target on how many customers it hopes to add by the end of its first 4G quarter. He says: ‘We are not talking specifics regarding numbers but we are pricing at what we think is a good level but which also balances the commercial reality of what we are investing in the network.’

The data levels raised some eyebrows, with some noting the entry-level 500MB monthly cap would be insufficient for the types of content one can download quickly over a 4G network. Kester Mann, analyst at CCS Insight, says: ‘Offering faster data speeds with limited data volumes for more money is not an easy message at the point of sale. The offer of free Wi-Fi as well as care and content promotions will help but they are unlikely to be enough after pent-up demand for 4G services has been satisfied.’ Allera argues data use is much lower than one would assume. He says almost 80% of subscribers to its Orange Panther tariff, which favours heavy internet use, use less than 500MB per month. ‘Not every customer is downloading large files like films, so 500MB is sufficient for those who want to use the internet at faster speeds. 8GB is more than enough for 99% of our customers.’

Unlimited tariffs?

However, Mann warns one of the biggest challenges the network faces is the unlimited data offer its T-Mobile Full Monty tariff provides. He says: ‘It has become a core element of its portfolio, as underlined by the strong growth in the T-Mobile brand in the past two quarters. Customers will weigh the merits of a proven unlimited tariff against one that costs more but is faster. In our view, cost will prevail in many cases, especially as an unlimited tariff avoids ‘bill shock’. We believe the consumer LTE tariffs will need to be revisited after the fourth quarter.’

But what will this lead to among EE’s rivals? Operators Mobile spoke to appeared calmer in the days after pricing was revealed. Vodafone launched a multimillion-pound campaign last week highlighting its plans for 98% indoor coverage and a 4G early handset upgrade guarantee. Rivals are likely to talk up their own HSPA+ networks. But EE did not trigger the next-generation price war many feared. Matthew Howett, regulation analyst at Ovum, says: ‘The rest of the industry is likely to make the most of highlighting what customers can do on their upgraded 3G networks, expressing benefits in ways customers will easily understand – how long it will take to upload photos to Facebook, or download movies on the go. However, customers on those networks will only see the same benefits as EE customers come the auction of spectrum planned for next year.’

Written by Mobile Today
Mobile Today

Comments

Guest
also the lack of handsets being submitted in to the term and commission being dedecuted from Orange and Tmobile to subsidise EE comms. Makes it less a ...
Hi Guest, feel free to drop me an email. Im deputy editor at Mobile. graeme.neill@nhmedia.co.uk
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