LONDON-The successful market entry of new players in Western Europe caused cellular prices to drop 15 percent to 25 percent last year. However, in the duopoly markets of Ireland and Norway, prices barely moved, according to “European Cellular Pricing Strategies,” a new study conducted by Strategy Analytics.
New entrants to markets such as Austria, Italy, Spain, Portugal and the Netherlands inspired a new round of price competition, with some Dutch users seeing expenditure levels halve during the year, the report said.
By contrast, cellular prices have remained relatively static in the duopoly markets of Norway and Ireland, as well as in Sweden, where no new players have entered the cellular market since 1992.
“There is little incentive to compete on price when you only have one competitor,” said Phil Kendall, senior industry analyst at Strategy Analytics.
“The Norwegian cellular operators may have done much for consumers through the development of more and more advanced services and applications, but pricing levels are starting to become expensive by European standards,” Kendall said.
“And in Ireland, where GSM license holder Meteor Communications has seen its launch date continually postponed by legal action, the two incumbents may be bracing themselves for some fierce competition. But in the meantime, they are maintaining prices at a relatively high level,” Kendall noted.
Strategy Analytics suggested, however, that increasing the number of players in a market does not necessarily guarantee falling prices-new entrants need some regulatory support.
In Finland, the incumbent operators Sonera and Radiolinja have been able to ignore almost entirely the low prices introduced by new entrant Telia Finland in 1998.
Until Telia Finland finally negotiated a national roaming agreement in October and could begin offering nationwide service, “Telia Finland represented no competitive threat in the market,” Kendall said.
“With the regulator finally supporting Telia’s efforts to use its competitors’ networks, Telia now has a chance to offer a more credible alternative-this will undoubtedly force a more significant price response from the incumbent operators,” said Kendall.
