Telefonica/O2 Throws Down Gauntlet for Data Roaming

| Jan 16, 2007 | Wireless Services - Europe | Competitive Update

| Analyst: Emma Mohr-McClune

Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderate

Event Summary

January 14, 2008 – Telefonica announces an initiative to cut data roaming costs by 40% across its Movistar and O2 units in Spain, UK, Ireland and Germany before the summer. The maximum price of a roaming SMS will be EUR 0.32 for both contract and prepaid customers, representing a discount of 32%. From February 18, Movistar will introduce new daily and monthly rates, including a daily rate of EUR 10 per day for up to 10 MB of data usage in roaming mode. It will also introduce new tools from June 2008, including a ‘Desktop Movistar’ to allow users to monitor their daily roaming usage in real-time.

Analytical Summary

• Current Perspective: Positive on Telefonica’s plan to introduce discounts of up to 40% on data roaming across both its Spanish and European O2 units. This pre-regulation initiative will benefit both consumers and businesses, and help the group to underline its brand profile for simple, fair and transparent pricing.

• Vendor Importance: Moderate to Telefonica and the O2 Group, as this announcement will almost certainly be met by competitor responses in the coming weeks and months. Telefonica is one of the first to make a comprehensive, group-wide announcement on data roaming discounts, but it is unlikely to be the last.

• Market Impact: High on the European mobile market, as this announcement will require all mobile operators in the UK, Ireland, Germany and Spain to re-assess their own mobile data roaming offers in this light. All competitors should be aware of Telefonica’s decision to go with time-based billing, daily and monthly rates, as well as laptop software tools to monitor usage.

Recommended Competitor Actions

• The Vodafone Group should consider a group-wide initiative for mobile data roaming, following on from its successful voice roaming Passport initiative. Although Vodafone has initiated some interesting services in certain markets, it should think about extending this to a broader and more comprehensive group-wide push to underline the natural advantages of its pan-European footprint.

• All operators should think about ‘roaming bundles’ as a possible way to attract users to use SMS abroad. Users could, for example, be encouraged to buy a ‘bundle’ of SMS for use abroad, prior to a foreign trip. This strategy has worked well in ‘promotion’ mode (i.e., just before Christmas or the summer holiday period).

• T-Mobile International should be alert to O2’s plans to restructure its mobile data roaming services along time-based lines. T-Mobile International should now take the recent innovations it has made in terms of web’n’walk day/ month rates, and extend these in a roaming context.

• All operators looking to revise their data roaming rates in the coming months should keep two goals top-of-mind: pricing clarity and simplicity. Any new service which falls down on either of those two prerogatives is heading for failure.

CLIENTS ONLY

Competitive Positives and Concerns

Recommended Vendor Actions

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