But customers continue to tighten purse strings
Earlier today, EE confirmed the return of roaming charges for all new and upgrading pay-monthly customers, applicable from January 2022. O2 and Three have also changed their fair-usage limits for data usage in Europe, but stressed that they’re not reintroducing charges.
In 2017, roaming fees between EU states were abolished, meaning that citizens have since been able to pay the same abroad as at home. But the UK’s withdrawal from the bloc meant that British operators no longer had to abide by Brussels’ regulation.
In my view, bringing back roaming reflects a continued failure by telecom operators to stem a long-term decline in average customer spending. Among pay-monthly customers, this fell from about £25 in 2016 to just over £15 in 2020, according to our Market Landscape and Forecast: Telecom Operators, UK, 2021-2025. BT itself reported a more than 11% fall in average post-paid customer spending just in the year to its fiscal 4Q20/21.
Operators have sought to address the drop by tapping into areas such as sport and entertainment, part of a strategy dubbed “more for more”, but it appears to have had little effect in one of Europe’s most competitive markets.
BT’s decision, however, won’t have been taken lightly. Roaming is a poisonous term for consumers after travellers were hit by exorbitant prices for years. But EE’s move is a far cry from those days. The operator plans to charge £2 per day in 47 destinations — a fraction of the cost of a holiday in the EU. Sceptics may say it’s just the prelude to higher charges in the future, but that would be difficult to implement and could attract the attention of Ofcom if the regulator deemed such a move unjustifiable.
Still, the operator knows that today’s news will not be well received by its customers, and that it has handed on a plate a clear marketing opportunity to rivals. It would have carefully calculated that the benefits outweigh any potential damage to its reputation.
BT’s return to roaming doesn’t come as a complete surprise. In 2020, it announced broad price hikes in line with the consumer price index rate of inflation plus 3.9%, effective from 31 March 2021. At the time, it said that the move aimed to offer greater clarity and predictability for customers. A few weeks later, during CCS Insight’s Predictions event, Marc Allera, CEO of BT’s Consumer brands, explained the company’s premium positioning, saying that customers may be able to buy cheaper, but never better.
Then in May 2021, during BT’s full-year results, its Openreach unit announced plans to ramp up deployment of fibre-to-the-premises connections (see Instant Insight: BT Results, Fiscal 4Q20/21). The need for increased investment to achieve new targets may have been the trigger for BT to consider selling a portion of its BT Sport business (see Instant Insight: BT Discusses Future of BT Sport). It’s clear that the operator is directing its attention to connectivity, and bringing back roaming fees will provide some financial support for this renewed focus.
All eyes will now be on BT’s rivals, which face an interesting dilemma: should they follow suit in a similar hunt for higher average spending, or hold firm and dial up their marketing, positioning themselves firmly on the side of consumers? As Covid-19 restrictions slowly ease and international travel resumes, it will be fascinating to watch how this move plays out.
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