Mobile Network Comparison

A sad day today – Giffgaff officially announced a pretty hefty price bump to their PAYG rates for calls and SMS. The tariff increase doesn’t go live until 6th October but it still makes a significant difference to their customers who don’t use the excellent value goodybags.

• The price for texts has risen a whopping 50% as each one goes from just 4p each to 6p each.
• Calls have gone up by 25% from 8p/minute to 10p/minute. This includes call forwarding.
• All other charges such as voicemail, premium rate numbers, mobile data and goodybags have remained unchanged.

Giffgaff have blamed the price increase on Ofcom’s reduction in Mobile Termination Rates (MTRs) earlier this year which affects their profit margins. This was the same excuse used when ASDA Mobile increased their prices by the same amount and Orange’s rates rocketed in June, as well as Vodafone’s mass fee hike back in July. They also claimed it was needed to make the business more profitable.

Frankly, these reasons are a bit of a red herring and it’s a clear move to persuade more customers to move to the guaranteed income of goodybags. The product most affected by the MTR increase is the Hokey Cokey goodybag which remains unchanged. Texts are completely unaffected even though their price went up by the biggest percentage. It’s worth remembered that texts are also massively profitable for mobile companies even at just 4p each.

As for the profitability – Giffgaff is still an incredibly new company and it’s rare to recoup investments so early. They have also admitted that they are ahead of schedule for all their income targets. So that’s why it’s a sad day – it reeks a little of money grabbing and bait-and-switch now they’ve attracted a large userbase. It remains to be seen whether all the people leaving for cheaper networks will cause them to lose more income than the price increases gain.

Despite all this, we still have to commend Giffgaff highly. They, unlike any of the other networks, conducted a two week customer consultation to discuss the price increase. They didn’t spring it on their users unlike their rival networks and they listened to their users’ feedback. And even though Giffgaff might not have rock-bottom rates any more, we still argue that it’s probably the best value PAYG network. Some of the reasons are that, even though prices have gone up, you still get unlimited calls and unlimited texts absolutely free to friends and family on Giffgaff all day every day. This is an unbeatable offer and potentially saves huge amounts of money. Then there’s free credit with the payback scheme and the £5 joining bonus. What’s more their goodybags are some of the very best deals around and they have pledged not to increase their prices. Of course, for all the goodybags costing more than £10 you get truly unlimited data which is a fantastic deal.

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We’ve already written quite a bit about Ofcom’s upcoming 4G spectrum auction but haven’t talked about other ways it can be leveraged to enhance consumers’ experiences of mobile networks.

As those who live out in the sticks are painfully aware, rural mobile coverage is spotty at best. The independent Communications Consumer Panel recently recommended that Ofcom set mobile providers network coverage obligations.

The Panel have asserted in their report that the upcoming 4G spectrum auction is a critical point for determining the future of mobile coverage in the UK. It will raise a huge amount of funds for Ofcom and they have suggested that some of this should be retained to help fund improvements to network coverage outside of big towns and cities. The Communications Consumer Panel also posited the idea of mobile networks bidding for funds to extend rural mobile coverage in a sort of “reverse auction”.

Colin Browne from the Communications Consumer Panel said that “there are a lot of small businesses operating in rural areas” and that “it’s really important to get them the help and support they need. Good communications are a vital part of that”. He emphasised that the 4G auction is the perfect opportunity to do something about rural blackspots and that market pressures will not be enough – the only way coverage will improve is through Ofcom enforcing regulations. He also maintained that the 4G spectrum auction shouldn’t be looked at purely from the point of 4G saying, “the opportunity here is that the auction could help extend mobile coverage of one kind or another”.

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Tom Alexander will resign from the UK’s biggest mobile network, Everything Everywhere (made up of France’s Orange and Germany’s T-Mobile). He will step down at the end of August to be replaced by Olaf Swantee, the current head of France Telecom’s European mobile operations, but Alexander will remain on in a consultative role for the remainder of 2011.

The industry gossip is that France Telecom and Deutsche Telekom who jointly own Everything Everywhere had got fed up with the slow growth at and were frustrated with Tom Alexander’s inability to cut costs following the merger. Alexander had spearheaded the joining of Orange and T-Mobile only a year ago creating the UK’s biggest mobile network with 28 million customers in Britain. Before that, he had who famously made millions with Virgin Mobile, the UK’s first virtual network and had run Orange twice.

However, some thought that his successes at Virgin Mobile and Orange were simply down to luck and, since the start of this year Everything Everywhere reported a 2% decline in revenue and a significant drop in new customers. The £3.5bn of cost savings demanded were also far from being met.

In an internal email he sent announcing his resignation, Alexander said, “It’s been a fabulous three and half years here … I have been impressed by the brightness, the talent, and the dedication of those that I have worked with, and I’ve made some great new friends.” He went on to write, “I am deeply proud of all that we have achieved together – forming the largest mobile telecommunications business in the UK”.

However, he also said “I feel it is now the right moment to hand over the reins to somebody else”. Sources within the mobile industry suspect that Everything Everywhere will now also lose a huge number of senior executives who had followed Alexander in from Virgin Mobile. This news leaves a slightly uncertain future for Everything Everywhere who are now under pressure to deliver savings to shareholders which will inevitably cost several jobs in the UK.

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