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Mobile arbitrage and truly global competition
I had to use quite a lot mobile data in Italy. After three SIM cards, two from TIM and one from Three, I was quite convinced I would never get what the sales person promises, especially the total data amount always included surprises. Sometimes the amount was different than promised, sometimes it just stopped working and the customer support was only in Italian. Sometimes it had strange weekly or day time, night time limits. In total I paid €95 to get 64 GB data, but in reality I got about 22 GB.
At the same in the UK I have a Three subscription that offers free roaming to 45 countries within “reasonable” use limits. Another person was in Italy too, and he had a Finnish SIM card that included 10GB data roaming, and very reasonable price for additional bytes. And soon, thanks to EU, roaming charges are not possible within the EU anymore.
This all led me to think a larger question. There seems to be an arbitrage opportunity in mobile minutes, but especially in the mobile data market. For example, it looks like it is better to get a subscription from the UK or Finland to use mobile services in Italy. And actually it is also the case for one of my UK mobile subscriptions that offers cheaper mobile data in the US than I could get from any US carriers. It works for Hong Kong too, although the prices are reasonable in Hong Kong.
I used to have a UK mobile subscription that when roaming in over 30 countries included calls and text messages without additional charges, but its calls from the UK to other countries were very expensive. So, I used that subscription when roaming outside the UK, and then used another mobile subscription from another country when calling from the UK to other countries.
Maybe I’m not really an ordinary customer, and probably it would be difficult to start larger scale trading with SIM cards, airtime and data. But this definitely raises relevant questions about the future of mobile business. It most probably has an impact on the carrier business.
To me this clearly indicates that competition is not only local. There are more and more users that use a SIM card from another country. Most probably this will especially be significant inside the EU. It then easily means that carriers need to find more partners from other countries, how to handle this. Now the development has almost been the opposite, many carriers have divested operations in other countries and focused more for example on the local content business. But the impact is not only inside the EU, when roaming packages are becoming more global.
Roaming has been good and easy money for carriers. Now the trend seems to be that the time of this easy money is over for them. Regulation, Wi-Fi and competition have changed the situation. Most carriers will soon offer fixed large data packages including roaming (the US is probably an exception, but its mobile services often live their own lives).
We also see situations where competition locally has been quite stable in many countries, when a country typically has three to five operators that have somehow ended up with similar offerings. But when competition and models start to come from other countries too, it can shake the situation in many domestic markets.
We don’t know yet what this means as a whole. But we can assume it could mean more consistent price levels for mobile services globally or at least regionally. It can also mean more global alliances, like in the airline industry, and of course consolidation too, although the trend has been the opposite. This also cuts data and roaming prices, but on the other hand, people need more data and are also ready to pay for it; it is so crucial.
Carriers must prepare for 5G investments, and decreasing prices or margins don’t help. It means more pressure to network equipment suppliers. But especially this trend means carriers are really bit pipes and they must focus on optimizing those bit pipe operations, and forget all other less relevant activities.
And it is not only about price, but also about the customer experience. It was not perfect in Italy, but at the same time I found out Telia Finland has taken payments from bank accounts the last five years, although I had closed the subscription that long ago. So, maybe in the end it is only about the price, when you cannot expect much more from any carrier.