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Mobile price wars flaring up everywhere but America

August 31st, 2012 at 11:10 AM

In the second quarter this year, the U.S. mobile market was still an oasis of calm, But across the globe, mobile carriers have started struggling with a cluster of price wars breaking out from Europe to Africa and Asia.

This week, the French giant Bouguyes warned about its 2012 earnings coming in 41% below the 2011 level. The big problem in France is Free Mobile, a new service offering a €20 monthly plan with no long-term contract. Free Mobile has also dented the fortunes of Vivendi and France Telecom, both of which have announced substantial layoffs.

In New Zealand, Vodafone and 2degrees are locked in a battle of new $19 monthly plans — and a discount brand called Skinny has now launched a daring $4 weekly plan featuring 60 minutes of voice calls and 60Mb of mobile data.

In South Africa, a grim discounting battle grinds on. The latest shock came last week when MTN slashed its mobile data pricing from $35 to $11 for 1GB. The price of the 500 MB package plunged from $19 to $6.

All of these examples have something in common: they feature operators pushing the monthly cost of a mobile voice, texting and data package below $30 USD. In southern Europe, the move is mandated by a deteriorating consumer spending climate. In places like New Zealand and South Africa, the competition seems to stem from a large number of mobile operators with aggressive subscriber growth plans.

The U.S. market lacks either of these two triggers. As a result, the recent new price cuts by MetroPCS (PCS) and T-Mobile seem positively minuscule in comparison. Both Sprint (S) and T-Mobile clearly believe they don’t yet have to engage in scorched earth strategy. AT&T (T) and Verizon (VZ) are so complacent they are actually hiking prices — at least for consumers not opting for family plans.

It will be interesting to see how long the U.S. market can remain a haven of high-priced calm. Fat and happy dominant carriers would seem to be precisely the kind of target for the disruption that is convulsing France right now.




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