Our mobile market is competitive

Comment: The mobile telecommunications market has experienced unparalleled growth over the last five years and has been a fundamental building block in the development of our macro-economic vitality.

Now a €2 billion per annum industry, mobile telecoms is responsible for 54,000 direct and indirect jobs, and contributed €883 million in revenues to the Government in 2004/5.

The importance of this industry means it is subject to frequent comment. Headlines following the recent publication of both Vodafone's latest results and those of Ireland's other leading mobile network operators' focused on how the mobile market place is now more competitive than ever. This is indisputable. However, the subtext to this conclusion - that competition is a new development in the market and that Irish consumers have previously been overcharged for mobile services - is incorrect.

The mobile industry has continually struggled against widespread misconceptions, including:

That market failure exists in the Irish mobile market;

Irish consumers are paying more for their mobile services;

Irish consumers pay in excess of their EU counterparts;

Irish customers don't consume more voice minutes or texts compared to other EU markets.

A frequently overlooked footnote to this is that mobile operators have been investing billions in developing Ireland's telecommunications infrastructure. Vodafone Ireland is already half way to meeting its commitment to invest €1 billion in 3G over seven years - an investment spend of €3 million per week. Investments in new technologies, such as Broadband and 3G are for many providers still in the risky phase, as witnessed by the recent financial tribulations of an industry player.

Let's consider the level of competition. The Irish mobile market has always been competitive and dynamic, driven by various factors: the growth in popularity of mobile devices, the lack of growth in landline take-up; the lack of intrusive regulation inhibiting innovation; and the fact that there are four mobile network operators competing for the custom of only four million people (in the UK there are five operators or up to 20 service providers in a market of 60 million).

Market reports confirm that the smaller operators have now achieved a combined market share of almost 17 per cent. Their ability to grow significantly is evidence that competition is and has been working.

The amount of consumers who change networks while retaining their mobile number (porting) is another indication of how fluid this market is. Since June 2003 over 614,500 Irish consumers have opted to port their numbers. Smaller operators tend to be net gainers in these circumstances.

ComReg data shows the percentage of customers with a fixed line has dropped from 82 per cent to 69 per cent in the period from Q1, 2002 to Q2, 2006. In tandem, mobile market penetration now stands at 103 per cent. The mobile market is competing against, not just traditional mobile providers, but fixed line operators. Recent Amárach research showed that 31 per cent of consumers do not own a fixed phone, indicating that more people depend exclusively on their mobiles for communications.

Customers increasingly recognise that the fixed line rental is poor value compared to mobile services either prepay (pay as you go) or a postpay minute bundle.

Therefore, claims that the Irish market is in effect "carved up" between the two main players are false - a point effectively confirmed when ComReg withdrew their defence of similar allegations at the Electronic Communications Appeals Panel following an appeal from Vodafone, 02 and Meteor.

On the question of whether Irish consumers are paying more for their mobile services, a recent ComReg report highlighted that telecommunications prices have decreased significantly in comparison with the overall Consumer Price Index (CPI). In other words, Irish mobile prices are coming down in a climate of prices rising.

Mobile phone costs for Vodafone Ireland customers have fallen by almost 50 per cent since January 2000. What other service industry can boast such decrease in unit costs?

In the 12 months ending September 2006, Vodafone Ireland customers used 9.8 per cent more voice minutes than in the previous 12 months. However, the average revenue per user (ARPU) in the same period reduced by 4.9 per cent from the previous year.This reflects the ever increasing value Vodafone is providing to its customers.

Another often-cited point is that Irish consumers pay higher charges for their mobile calls than other EU consumers. Comparisons of ARPU are used as proof - for example, German ARPU was €22.40 compared to €46.90 in Ireland, in the last quarter.

However, ARPU is not an indicator that Irish mobile charges are higher than in other countries, as ARPU is a measure of both price and usage.

That Irish consumers use their mobiles more, and that as a consequence ARPU is higher, is accepted by ComReg, who in their Quarterly Report for Q1 2006, stated: "ARPU is an indication of monthly spend and cannot be used on its own to deduce the cost of mobile calls in Ireland."

Further, ComReg stated: "Ireland remains in a relatively good position in relation to costs paid by consumers, being approximately 7th out of 19th countries surveyed in Europe in post-paid and 9th out of 19 countries in pre-paid."

Finally, let's examine whether Irish consumers use more voice minutes or texts compared to other EU markets. Public data from Vodafone clearly indicates that Average Minutes of Usage (AMPU) in Ireland is the highest in Europe. In the last quarter, Irish mobile phone users consumed on average 225 voice minutes and sent 114 text messages each month compared with a Vodafone European average of 137 voice minutes and 59 text messages.

In conclusion, with its high level of price and service innovation, Ireland can justifiably claim to have one of the most competitive mobile markets in the world.

Gerry Fahy is strategy director at Vodafone Ireland