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Iliad Italy: Pricing after the disruption. What happens once the dust settles?

by Bernadette Finn | 3月 12, 2020

When Iliad hit the Italian market in 2018, it shook up the mobile market with low cost pricing accompanied by large allowances, aimed at market share grab. But how are Italy’s mobile prices faring two years on as Iliad becomes more established as the fourth provider?

In 2012 Iliad (Free) France unveiled its entry level price plan for €2 per month for 1 hour of calls and 60 text messages with no contract;  sparking a price war with the three main operators, Orange, Bouygues and SFR.  Eight years on, it has left France as one of the cheapest countries for postpaid mobile and the four providers have settled into a stable price equilibrium, with prices steering slowly back up to 2018 rates. The graph below, taken from Teligen shows the cheapest plans for 30 calls 0.5GB Basket across the top two providers in France from Q2 2018 to Q4 2019.

Teligen’s OECD Mobile Voice and Data Price Benchmarking Dashboards

Iliad made a similarly dramatic entrance to Italy’s market in May 2018 with a predatory low cost offer of €5.99 per month with 30GB, unlimited SMS and no contract. The impact of this low cost offer shook up incumbent operators TIM, Vodafone and Wind Tre, forcing lower prices, along with the launch of budget sub brands such as Kena from TIM and Ho from Vodafone.

By the end of 2019, offers from all the main providers had fallen, with the exception of Tre (Wind Tre) who had instead gone down the route of introducing promotional offers, such as free data. Existing Wind customers received 20GB data. Budget brands Kena and ho also launched very low cost offers to counter Iliad. The impact of Iliad on pricing in the Italian market can be seen in the graph below.

According to the most recent figures from Strategy Analytics Service Provider Strategies (SPS) data, Iliad had 4.5 million mobile subscribers at the end of September 2019 giving them a 5.0% market share. Another noticeable impact is the 12-month rolling mobile service revenue in Italy which has fallen over 14% since Iliad’s launch, compared to a 4.8% decline for the same period prior to the launch.  With their aggressive pricing model, prices in Italy seem to have gone the same way as France, with TIM and Vodafone channelling cheaper offers through their budget brands to compete with Iliad. A more detailed look at the pricing of these two budget offerings, however, shows much more targeted pricing to entice customers away from the threat that is Iliad. A customer churning from Iliad to Kena would be able to secure a 70 GB 4G data allowance with unlimited minutes and SMSs for €5.99/month. For customers churning from Ho, the allowances is 50GB, with unlimited minutes and SMSs, while new customers are charged €13.99 for 70GB, and unlimited minutes and SMSs. Ho has a similar approach, with its lowest tariff of €5.99 for 70GB, unlimited minutes and SMSs offered to customers churning from Iliad (plus selected other providers). It is unlikely that the battle around pricing in Italy is over, but it remains to be seen how far this will go and how long it is sustainable for the providers. Consumers, on the other hand will continue to expect more for less.

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