There are more mobile operators than ever in Ireland, but competition is far from aggressive. Ian Campbellreports
AT THE height of the Celtic Tiger, mobile phone companies were numbered among the purveyors of “rip-off Ireland”. In the new era of austerity, as mobile phone bills come under more scrutiny and consumers and businesses look for better deals, it is a reputation they may struggle to shake off.
While customers might find incentives to switch operators, they are presented with fewer tariffs and more expensive options than other countries, driven by four service providers that still collect the second-highest ARPU (average revenue per user) in Europe.
On the face of it, Ireland appears to be more competitive. An EU report shows that the mobile price per minute has fallen from 11 cent to 10 cent and is below the EU average of 13 cent.
The British price per minute is 13 cent. But because the mobile market is dominated by bundled minutes and subsidised handsets, deals are better in Britain.
In Ireland, with fewer price plans to choose from, users will almost certainly spend more than they need (see panel). This may explain the higher ARPUs as much as the ComReg justification that the Irish talk and text more.
A survey by the Body of European Regulators for Electronic Communication points at another factor. Peak-time mobile termination rates (MTR) are only topped in Switzerland and Bulgaria, and are well above the European average.
Off-peak is only marginally better and still higher than in most countries. The MTR is the wholesale fee charged to other carriers, fixed and mobile, when calls end on their network. They have a significant impact on retail charges.
Despite the downturn, the recent launch of eMobile and Just Mobile indicate sustainable business models are still to be found in the Irish mobile market.
The most recent financial statements from the network operators confirm this. They reveal a fall in ARPU but a growth in revenue suggesting healthy businesses, largely unimpaired by recession. They claim to have reduced their tariff charges steadily over the years with revenue falls offset by the rise of mobile data and mobile broadband services.
John Strand, a leading telecoms consultant, said the four main mobile operators – Vodafone, O2, Meteor and 3 – control an oligopoly in Ireland and have little reason to make the market truly competitive.
“Ireland is a country that has been delivering a stable cash flow for them for a number of years. They are not interested in rocking the boat.”
Ireland has three mobile virtual network operators that bring further segmentation, but Strand doesn’t believe they can significantly increase price competition because they are ultimately controlled by the operators who let them piggyback on their infrastructure.
Strand is based in Denmark, a country with a 5.5 million population that is comparable in size to Ireland with the same number of operators.
“The difference is that Denmark has some of the lowest tariffs in Europe and the operators are much more aggressive. The owners of the networks don’t look at Denmark as a cow they can milk,” he said.
When asked why tariffs in Ireland are still higher and with less choice than our nearest neighbour, the operators (except for Vodafone, who declined to comment) point out that Ireland has long been recognised as an expensive place to do business.
Higher wages and expensive retail leasing are just two examples of baseline costs that make a basket of many Irish goods more expensive than many European counterparts. While some of these factors will become less of an issue in the recession, others will remain, according to Tony Hanway, consumer sales director at O2. “If you leased property in the last five to 10 years you could be locked in for 25-year rents that show no link to commercial reality.”
He said it was a massive issue for the industry along with the inherent challenge of serving mobile subscribers in a country with Ireland’s geography. “A higher density of network investment is needed because the country is quite unusual in terms of population density, and topographically it’s quite difficult to cover.”
Eoin Macmanus, commercial director at 3 Ireland made the same point. “When you are trying to manage a network for a population that is as geographically spread as Ireland, the cost of managing the network per user is much higher.”
Suggesting that infrastructure costs must surely have been alleviated by many years of profit were met with a reminder that ongoing infrastructure updates were needed to provide the capacity to meet growing demands for data. Vodafone, O2 and 3 all operate in the UK as well as in Ireland where they offer cheaper tariffs and a lot more choice. Why?
“Every market is different. We could be a very streamlined multinational and offer the same products and the same tariffs but the problem is that customers wouldn’t bite on it,” said Hanway.
Macmanus, from 3, said it costs a lot of money to set up new tariffs and was also adamant that simply replicating British packages wouldn’t work in Ireland.
“It’s a different market and customers have different requirements and different profiles.”
Strand does not entertain this argument. “I have worked with 160 mobile operators in 30 countries. To claim there is a big difference in the way people use their mobile phones from country to country is the same as claiming that McDonald’s is not a global business. It’s totally nonsense.”
On the high-cost of mobile termination rates, ComReg has been putting pressure on the operators and expects Ireland to be close to the EU average by the end of this year.
The move is welcomed by Ronan Lupton, chair of Alternative Telecom Operators. He argues that it has not just been bad for customers, it has been damaging for Ireland Inc.
“Fixing the MTR rate to allow greater line call reduction will have a knock-on effect for consumers and the business environment, making Ireland a slightly more attractive place to do business,” he said.
Bill Blake, head of consumer segments at Meteor, believes it will trigger a new wave of competition.
“As MTRs come down, the operators will be freed up to offer more value,” he said.
BUNDLED DEALS BETTER IN BRITAIN: IRELAND LACKS TARIFF CHOICE
IRISH OPERATORS offer fewer tariffs – which means subscribers are less likely to find a package that matches their mobile usage.
The upshot is that people are more likely to spend more than they need, either through unused minutes or by going over their limit and paying higher rates.
The small print in the contract will outline extra costs that cover everything from out-of-bundle rates for calls and texts to roaming charges.
Comparing operator tariffs is notoriously difficult because they never quite match each other like for like. But even a cursory comparison with a British tariff exposes a general lack of value in Ireland, with the exception of Meteor, which proved very competitive with this particular handset.
We randomly selected a smartphone, the Sony Ericsson X10 Xperia Mini Pro, and looked for the best entry-level post-pay tariff we could get as a first-time customer.
The most striking difference is that the device is free with Vodafone in Britain, but there are other considerations.
The British contract is two years as opposed to the 12 and 18 months offered in Ireland.
Also, the Irish operators bundle free same-network calls and texts.
