The impact of inflation reaches the telecom sector: after Vodafone, will there be more price increases?

The telecommunications market in Spain is not winning because of fear. Vodafone announced on Wednesday that it will link its prices to the development of the IPC (Consumer Price Index). Specifically, as of January 1, 2023, it will take as reference the estimated record between the years between October of the previous year and September of the current year, according to the newspaper ‘Expansión’ on Wednesday. Low-cost customers, Lowi, as well as customers covered by social rates, will be excluded from this increase. Sources from the operator confirmed that the measure is aimed at “promoting long-term business sustainability” and ensuring sufficient financial strength to invest in the deployment of technologies such as 5G. They also justified the movement that the telecom sector is the only one that did not apply this reference when updating prices and that Vodafone is already using this formula in other countries such as the United Kingdom. The question, once the price change becomes a reality, is whether Vodafone’s movement portends further changes. In this sense, the experts consulted warned that other operators such as Telefónica already have clauses in their contracts that open the door to adopting CPIs as a reference in their rates. Vodafone sources have justified the price change in “promoting the long-term sustainability of the business” and in gaining investment leverage, business sources consulted by ABC indicated that customers, once notified of the price change, will have a month to terminate your account. Unconditional contract. Additionally, they have been split over the step taken by Coleman Deegan’s phone. On the one hand, they pointed out that “there is price freedom” and that it is not necessary to go to references such as CPI, since prices can be updated when each company sees fit. From this sector, they evaluated the investment efforts of the major telecom companies and the current competition in the Spanish market. In this context, they argued that any price revisions to date have been accompanied by prior improvements in service. Along these lines, Vodafone sources, citing data from the National Market and Competition Commission (CNMC), reported that mobile phone prices have fallen 32% since 2008 and more than 34% of revenue in the past decade. On the other hand, the sources consulted did not rule out that the price hike will prompt the major operators to take action in the future. The importance of customer reaction From the point of view of the analyst of the “Ysi” phone price recommender, Alvaro Garcia Contreras, “Everything will depend on what happens with Vodafone, and on how customers take it: the rise has never been a positive. the following month or a similar period of time.” He then added that “the market regulates itself and assumes it.” In any case, for this expert, the increase decided by Vodafone is “too ambitious,” and, he noted, “does not believe that the customer determines the increase in The costs are with CPI but rather by an independent decision of the operator.” “The customer has many options and a lot of room for improvement in the phone bill.” Alvaro García Contreras, Recommendation Analyst “Ysi” In his opinion, the fact that in the event of changes in contractual terms of this kind, the Individuals and businesses have a month to unconditionally opt out that opens the door to the possibility of a “major exit” for customers. In any case, García (‘Ysi’) added that “customers have many options and plenty of room to improve their phone bill.” Juan Carlos agreed. Higueras, economic analyst and professor at the College of EAE Business, Nektiu CEO and ESIC Professor Alberto de Torres, on the risk that Vodafone is taking with this movement due to the current economic context. “One of the first things families will take is telecom service extensions,” Higueras warned, and believes that the reduced tendency of Spaniards to change service provider will be in their favor as well, as is the case with banks and insurance. Related news La Vodafone benchmark revolutionizes the sector and links its prices to higher interannual CPI Carlos Manso Chicote From January 1, the operator’s prices – excluding those of its second brand Lowi and its social prices – will be updated according to the estimated interannual CPI between October of previous year and September of the current year. This specialist recognized that there was still “some competition” although he added that in the area of ​​content, it must be remembered that users can directly contract their favorite movies and series with platforms such as Netflix, HBO, Amazon Prime and others. More price hikes? For his part, De Torres (ESIC) has shown its fear of a “general rise in the market” since the future union between Orange and Másmóvil changed prices at Vodafone. “What is important is how the prices will be, because there will be a general rally in the market and everyone will have their own communication strategy. It’s been perfectly talked about,” predicted. This expert explained that he did not see Telefónica or Orange following the same “way of action” as Vodafone and noted that increases could come from the lowest prices. In line with the above, he added that most of the “low cost” In the hands of the major operators: Lowi (Vodafone), O2 (Telefónica), Simyo (Orange), etc…