4/30/2008 4:10:00 PM
T-Mobile: We’re back!
They did it with Flext two years ago, and they’re at it again. T-Mobile: consumer champion, or market irritant? This week’s launch of the ‘Combi’ and ‘Solo’ tariffs has brought prices down in the contract market, giving consumers looking to tighten their belts a very attractive option.
Rival networks won’t see it like that. T-Mobile’s new deals will make the offers from the likes of O2, Vodafone and Orange look pricey once again, casting memories back to that famous blistering spell two years ago when Flext took 50% of the market for around four months.
While T-Mobile’s Combi and Solo deals are unlikely to be the runaway success of Flext, they will steal some customers from rivals and force them to cut their prices to match or undercut T-Mobile which will consequently hurt their margins.
T-Mobile’s base is still skewed to prepay (13.4 million on prepay from a base of more than 16 million) and underweight on contract.
So for T-Mobile, there is less risk on its margins from cutting prices – it is more interested in attracting more contract customers. Lessons will have been learned by T-Mobile from the Flext experience. It has to manage the balancing act of making an impact at launch but not blowing all its acquisition budget too early.
It has been almost non-existent in the contract market for several months, with Flext no longer markedly better value than rival tariffs, and the absence of commissions to entice independents. And with the Sim-only proposition, Solo, it has the option of competing without handset subsidy. The big question will be how much it will need (and use) independent retailers like Carphone Warehouse and Phones 4u, and whether rival networks cut prices too.