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Vodafone UK Decides Against LTE Premium Pricing

by Philip Kendall | 8月 07, 2013

Hot on the heels of O2, Vodafone has announced plans for another UK LTE network launch on 29th August. Its services will go live in London with a further 12 cities switched on by the end of the year. Vodafone has been a little more forthcoming with details of its pricing strategy: what initially looks like a service which comes with the almost-standard European approach of a 4G price premium is anything but that.

At the risk of over-simplifying, it can be summarized as a £5/month surcharge for LTE which offers users double the (3G) data allowance and also gives consumers the added benefit of bundling in either Spotify Premium or Sky Sports Mobile TV. In our recent report "Monetizing 4G LTE: Evolution of Pricing & Go-to-Market Strategies" we had highlighted content bundling as a trend to watch in LTE pricing as operators look to enhance value in the market.

So what that £5 surcharge for 2x the data actually does is move users up a tier in the existing Vodafone Red pricing AND gives them the free bundled content. For example, the differences in SIM-only standard Red and 4G-ready options highlight the fact that at each price point there is more value in the 4G option:

  • Red (3G) – £21/month for unlimited voice/text and 1GB data
  • Red 4G-ready - £26/month for unlimited voice/text and 2GB data and Spotify or Sky Sports
  • Red L (3G) – £26/month for unlimited voice/text and 2GB data
  • Red 4G-ready L – £31/month for unlimited voice/text and 4GB data and Spotify or Sky Sports
  • Red XL (3G) – £31/month for unlimited voice/text and 4GB data
  • Red 4G-ready XL - £36/month for unlimited voice/text and 8GB data and Spotify or Sky Sports

This model also exists if current Red customers want to add 4G and for customers taking out a new Red contract with subsidized handset. This approach keeps 4G out of the entry-level pricing option (we noted earlier this year that 60% of EE’s smartphone connections were on its 1GB plan) but certainly gives consumers a good reason to buy into the larger bundles.

This is a surprisingly aggressive pricing play from Vodafone and we believe that, perhaps more than Three’s plans to price 4G at 3G levels, this is a move which EE will struggle to ignore. EE still has a good medium term coverage and long term capacity advantage in the market, but Vodafone has certainly dented its expectation that competitor launches would vindicate its premium pricing approach.

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