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Revenues revert: Pricing conundrum in UK telecoms

9 May 2024
Access report

In-contract price increases have been the worst of all worlds—reputationally damaging for telecoms operators but contributing (temporary) revenue growth of just half the rate of inflation. We expect the revenue boost from in-contract price increases of 5% last year to become a 2% drag from Q2 2024.

Cost inflation is, however, cumulative with an acceleration in the gulf between costs and revenues forecast from here. We expect muted financial guidance for 2024/25 from BT Consumer and Vodafone UK over the coming weeks.

Rising new-customer pricing is a necessity if margins are not to be significantly squeezed, but competitive intensity and scale economics continue to thwart such efforts, with no real resolution in sight.

Related reports

Inflation-linked price rises: Ofcom proposes shutting the stable door

13 December 2023

Ofcom’s plan to ban inflation-linked price rises creates a headache for most operators, but the financial hit will not be felt for years, if then (depending on their replacement).

Ofcom is correct in pointing out some of the drawbacks of the practice, but it will likely be replaced by an alternative tactic that may well end up being worse for consumers.

The unintended consequences could be significant, with a period of uncertainty for operators, low-end plans less appealing to offer, and poor signaling to investors in the sector.

Access report

UK telecoms price increases: Not as good/bad as they seem

31 March 2023

Headline inflation-busting price increases of 14% mask effective increases averaging a sub-inflation 8%, due to their limited scope across the customer base and over time.

The high headline increases have led to attacks from political and consumer groups, we would argue unfairly, and may yet drive reputational damage.

Looking forward, inflationary increases may be banned, but we would expect higher fixed increases to replace them, and micro-regulating pricing structures does tend to result in unintended consequences.

Access report

Inflation begets inflation: Telecoms operators to implement higher price increases

20 January 2022

Higher overall inflation, together with a bigger mark-up than in previous years for some, is implying significant in-contract price increases for the UK telecoms operators—an average of 7.7% for the mobile operators.

Although we may see a 5-6% short-term boost to mobile service revenue growth from these price increases, new-customer pricing remains crucial and could erode the boost from these in-contract rises entirely.

We have been surprised by Ofcom’s interventions to discourage these price increases. The industry needs all the help it can get to fund next generation 5G and full fibre networks, and these in-contract price increases are no guarantee that prices and revenues overall will start to rise.

Access report

  • Inflation-linked price rises: Ofcom proposes shutting the stable door

    13 December 2023

    Ofcom’s plan to ban inflation-linked price rises creates a headache for most operators, but the financial hit will not be felt for years, if then (depending on their replacement).

    Ofcom is correct in pointing out some of the drawbacks of the practice, but it will likely be replaced by an alternative tactic that may well end up being worse for consumers.

    The unintended consequences could be significant, with a period of uncertainty for operators, low-end plans less appealing to offer, and poor signaling to investors in the sector.

    Access report

  • UK telecoms price increases: Not as good/bad as they seem

    31 March 2023

    Headline inflation-busting price increases of 14% mask effective increases averaging a sub-inflation 8%, due to their limited scope across the customer base and over time.

    The high headline increases have led to attacks from political and consumer groups, we would argue unfairly, and may yet drive reputational damage.

    Looking forward, inflationary increases may be banned, but we would expect higher fixed increases to replace them, and micro-regulating pricing structures does tend to result in unintended consequences.

    Access report

  • Inflation begets inflation: Telecoms operators to implement higher price increases

    20 January 2022

    Higher overall inflation, together with a bigger mark-up than in previous years for some, is implying significant in-contract price increases for the UK telecoms operators—an average of 7.7% for the mobile operators.

    Although we may see a 5-6% short-term boost to mobile service revenue growth from these price increases, new-customer pricing remains crucial and could erode the boost from these in-contract rises entirely.

    We have been surprised by Ofcom’s interventions to discourage these price increases. The industry needs all the help it can get to fund next generation 5G and full fibre networks, and these in-contract price increases are no guarantee that prices and revenues overall will start to rise.

    Access report