The impact of inflation reaches the telecoms: after Vodafone, will there be more price increases?

The telecommunications market in Spain does not win for scares. This Wednesday Vodafone has announced that it will link its rates to the evolution of the IPC (Consumer Price Index). Specifically, as of January 1, 2023, it will take as a reference the estimated interannual CPI between October of the previous year and September of the current one, according to the newspaper 'Expansión' on Wednesday. Customers of its 'low cost', Lowi, as well as those covered by social rates, will be excluded from this increase. Sources from the operator have assured that the measure aims to "consolidate the long-term sustainability of the business" and guarantee sufficient financial muscle to invest in the deployment of technologies such as 5G. They have also justified the movement in that the telecom sector was the only one that did not apply this reference when updating prices and that Vodafone already uses this formula in other countries such as the United Kingdom. The question, once the rate change is a reality, is whether Vodafone's movement heralds more changes. In this sense, the experts consulted have warned that other operators such as Telefónica already have clauses in their contracts that open the door to adopting the CPI as a reference in their rates. Vodafone sources have justified the rate change in "consolidating the long-term sustainability of the business" and in gaining investment muscle Business sources consulted by ABC have recalled that customers, once they are notified of the rate change, will have a month to terminate your contract without conditions. In addition, they have been divided about the step taken by the teleco directed by Colman Deegan. On the one hand, they have pointed out that "there is price freedom" and that it is not necessary to go to references such as the CPI, since prices can be updated when each company deems it appropriate. From the sector they have valued the investment effort of the main telecoms and the existing competition in the Spanish market. In this line, they have argued, that any revision of prices up to now has been accompanied by previous improvements in the service. Along these lines, Vodafone sources have recalled, citing data from the National Commission for Markets and Competition (CNMC) that mobile phone prices have fallen by 32% since 2008 and more than 34% of revenues in the last decade. On the other hand, the sources consulted have not ruled out that the rise in prices will prompt the main operators to take measures in the future. The importance of customer reaction In the opinion of the analyst for the telephone rate recommender 'Ysi', Álvaro García Contreras, "everything will depend on what happens with Vodafone, on how customers take it: a rise has never been positive . All the operators that have done so have lost highs in the subsequent month or a similar interval of time«. Then, he added, that »the market regulates itself and assumes it«. In any case, for this expert the increase decided by Vodafone is »very ambitious« and, pointed out, that »he does not believe that the client identifies the increase in costs with the CPI but rather with an autonomous decision of the operator«. "The customer has many options and a lot of room for improvement in their telephone bill" Álvaro García Contreras Analyst of the recommender 'Ysi' In his opinion, the fact that in the event of changes in contractual conditions of this type, individuals and companies have a month to Unsubscribing without conditions opens the door to the possibility of a "major exit" of customers. In any case, García ('Ysi') added that "customers have many options and a lot of room for improvement in their telephone bill." Both Juan Carlos Higueras, economic analyst and professor at EAE Business School, and the CEO of Nektiu and professor at ESIC Alberto de Torres, have agreed on the risk that Vodafone has assumed with this movement due to the current economic context. "One of the first things that families are going to take away is telecommunications service accessories," warned Higueras, who believes that the lower propensity of Spaniards to change provider will also play in favor, as is the case with banking and insurance. Related News standard No Vodafone revolutionizes the sector and links its rates to the rise in the interannual CPI Carlos Manso Chicote From January 1, the operator's prices - excluding those of its second Lowi brand and social rates - will be updated according to the Estimated interannual CPI between October of the previous year and September of the current one. This specialist has recognized that there is still "some competition" although he has added that, in the content business, it should be remembered that users can directly contract their favorite movies and series with platforms such as Netflix, HBO, Amazon Prime and others. More price hikes? For his part, De Torres (ESIC) has shown his fear of "a general rise in the market" since the future union between Orange and Másmóvil adds to the rate change in Vodafone. «The important thing is how the prices are going to be, because there will be a general rise in the market and each one will have their communication strategy. It is quite talked about », he predicted. This expert has clarified that he does not see Telefónica or Orange following the same 'modus operandi' as Vodafone and pointed out that the increases could come from the side of lower rates. In line with the above, he has added that most of the 'low cost' is in the hands of the big operators: Lowi (Vodafone), O2 (Telefónica), Simyo (Orange), etc...

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