EE Seeks Right Balance With 4G Data Allowance Adjustment
Everything Everywhere (EE), the UK ' s first 4G/LTE network service provider, has increased the data allowance on some of its 4G bundles by around 60%. EE is running out of time to maximise its first mover advantage in the 4G market and the data allowance boost is likely to be aimed at increasing subscriber uptake. However, we do not expect many mass market consumers to be won over by this offer , considering the usage limitations the operator still retains on the service.
|UK 3G & 4G Subscriptions Growth, 2010-2017|
EE has faced criticism over its initial 4G pricing structure, which many believed was too expensive compared to existing 3G offerings. BMI had argued that the operator was targeting high-value customers, rather than the mass market, as part of its overall strategy to make the most of its first mover advantage in the 4G market (see our online service, October 24 2012, EE Targets The Top With LTE Plans). That strategy now seems to have underperformed in terms of subscriber uptake, while continued customer discontent and open criticism may prove a potent threat against its brand perception.
We believe the data allowance boost is largely in response to customer feedback and a subdued uptake in the first few weeks of service, a phenomenon that is not unique to the UK market. Latest market data from the Swedish regulator show muted growth of LTE subscriptions, although we attribute this to the lack of 4G-enabled handsets until recently. According to EE, the data allowances for its 2G, 3G and 5G price plans have now been increased to 3GB, 5GB and 8GB respectively. However, we do not expect this move to win over many mass market customers, considering the increases only apply to mobile dongle users while the monthly access costs remain unchanged at GBP16, GBP21 and GBP26 respectively.
EE is running out of time to maximise its monopoly of the 4G market. Main rivals O2 and Vodafone are expected to launch commercial services around mid-2013, with a likely consequence being increased downward pressure on 4G tariffs. We retain the view that it is rational for EE to target a niche market at this early stage to avoid diminishing the value of those subscribers who would be attracted anyway, by incentives such as LTE-enabled handsets. However, the operator's data allowance adjustment suggest it is under pressure to strike the right balance between pricing and subscriber acquisition to avoid alienating potential customers who could become easy targets for its rivals when their services come on stream.