Contents

Summary
Scope
Results for mobile domestic services
Results for mobile roaming services
Results for combined domestic/roaming basket
Conclusions

Chapter 1 – Introduction
Points to bear in mind
Outline of the report

Chapter 2 – Mobile services: domestic
Introduction
Market developments
Methodology
Results including handset costs
Results excluding handset costs
Sensitivity analysis
Detailed results
Conclusions

Chapter 3 – Mobile services: roaming
Introduction
Market developments
Methodology
Structure of tariffs
Results for post-pay
Results for pre-pay
Sensitivity analysis
Results for combined mobile services basket
Detailed results
Conclusions

For the annexes to this document, please click here (pdf only).

Annex A – Exchange rates and VAT rates

Annex B – Detailed results for mobile baskets

Annex C – Detailed results for mobile roaming

Summary

Scope

S.1 This report is an international benchmarking study of mobile services (both ‘domestic’ and ‘roaming’), in France, Germany, Italy, Sweden and the United Kingdom.

S.2 This study is a follow up to the study published by Oftel in June 2002 (which was based on February 2002 prices). Oftel has carried out the analysis and drafting of this report. The tariff data used in this report has been collected by consultants HI Europe (formerly Total Romtec).

S.3 Points that should be borne in mind in interpreting the results are detailed in paragraphs 1.8-1.11 of this report. This report is not intended in any way to be a buyer's guide to services in the UK.

S.4 The results presented are based on a snapshot of prices as at 22 August 2002.

Results for mobile domestic services

S.5 Table 1 shows the results for the mobile price index (expressed relative to the UK price level). This analysis has been based on considering the cheapest packages available, irrespective of whether they are pre or post paid services, and including the cost of the mobile handset, which is assumed to be written-off over 18 months.

S.6 The results show that overall, based on the sample of service providers/operators selected:

• UK prices are about average; and
• prices in France are about the same as those in the UK, prices in Germany and Sweden are 4-6% cheaper while those in Italy are 27% more expensive.

Table 1: Cost of mobile services (best of post and pre-pay packages, cost of handset included)

August 2002 prices.
Note: the average is a simple average of all the basket results.
Q1 = usage quintile 1 etc; day = mainly daytime; Off-peak = mainly evening and weekend.

S.7 Since February 2002 there has been no change in the ranking of each country but the UK’s relative position against the other countries has improved slightly. The improvement since February 2002 is due to price falls in the UK and some price rises elsewhere.

S.8 The main changes between February 2002 and August 2002 are:

• there have been decreases in tariffs and handset prices in the UK;
• tariffs in France and Italy have stayed about the same while those in Germany and Sweden have fallen; and
• handset prices have increased in France, stayed about the same in Italy and Germany (for post-pay), and decreased in Sweden and Germany (for pre-pay).

S.9 The results are sensitive to the assumptions made regarding the handset. The UK moves to being the cheapest of the five countries overall if:

• handset prices are excluded;
• the period over which the handset is written-off is increased from 18 months to two years; or
• the price of the cheapest available handset is used, rather than benchmarking particular models.

S.10 In these cases, the UK's position relative to other countries has also improved from February 2002 to August 2002.

Results for mobile roaming services

S.11 Tables 2 and 3 show the results of the benchmarking exercise for mobile international roaming services for post and pre-pay consumers respectively. A price index (based on the two cheapest deals available) is shown for each of seven commonly visited countries.

S.12 The results show that UK prices for consumers roaming abroad:

• are lower on average than elsewhere for post-pay consumers, with prices in France 6% higher and prices in the other countries 14-25% higher; and
• are substantially higher than elsewhere for pre-pay consumers and on average are approximately double the prices in Italy and Sweden.

Table 2: Price index for mobile international roaming services by visited country (based on two cheapest deals) – post-pay

Table 3: Price index for mobile international roaming services by visited country (based on two cheapest deals) – pre-pay

S.13 The results in table 2 have also been run considering only the two operators in each country who were the earliest entrants (these generally also have the highest number of subscribers). The results of this show that prices in the UK are still the cheapest of the countries covered in this report.

Results for combined domestic/roaming basket

S.14 It is also possible to consider a combined basket including both domestic and roaming services for post-pay consumers. The results of this are similar to the results for domestic services only, reflecting the fact that the weight given to roaming services within the combined basket is relatively low compared to the weight given to domestic services.

Chapter 1

Introduction

1.1 Oftel’s aim is to provide the best possible deal for telecommunications customers in terms of quality, choice and value for money through effective competition. International comparisons of telecom services are one way of assessing the achievement of this aim.

1.2 Oftel carries out regular reviews of the major telecom markets to determine the appropriate level of regulation for the future. Regular benchmarking exercises allow a time trend to be developed, which provides greater information than a single snap shot. The results in this report will form part of the data input for future reviews.

1.3 This study focuses on comparing the cost for representative users for mobile services in each country using a ‘basket’ methodology. Oftel has carried out its own benchmarking work (as opposed to using alternative published sources) to ensure that the methodology is rigorous and robust and that it addresses the following issues:

• usage baskets need to reflect a range of patterns of use representative of different groups of consumers; and
• consumers have a potentially wide range of choices for their telecom services:
  – consumers have a choice of competing operators all of whom will offer different packages; and
  – each operator may offer a variety of different packages and discount schemes targeted at different segments of the market.
  Price comparisons need to take into account the range of products available to the consumer.

1.4 The following countries are included in the analysis:

• France;
• Germany;
• Italy;
• Sweden; and
• UK.

1.5 This study is a follow up to the study published by Oftel in June 2002, which was based on tariff data valid as at February 2002. This study is the sixth in a series that started with a study carried out by Teligen for Oftel and published in May 2000. A list of the ‘tariffs valid at’ date and date of publication of previous studies is given in the table below.

Table 1.1: List of previous studies

1.6 Oftel has carried out the analysis and drafting of this report. The models developed by Oftel used to generate the results contained in the report have previously been audited by an independent consultant, Analysys Ltd, who have additionally audited small changes to the model functionality for this report.

1.7 Data has been collected from the vast range of tariff packages available to residential and small/medium sized businesses for major operators and service providers in each country as at August 2002. Data collection has been carried out for Oftel by consultant’s HI Europe (formerly Total Romtec).

Points to bear in mind

1.8 There are a huge range of operators and service providers offering services to consumers and it is not possible to cover all packages on offer. In addition, it is not possible to capture fully all aspects of innovative tariff products. While it is believed that the sample chosen is fully representative and covers the range of offers available by country, the possibility that consumers have access to additional offers outside the range calculated for the sample used in this report cannot be excluded.

1.9 The objective of this report is to provide a comparison between countries for a range of consumer usage profiles. A range of profiles is chosen to be illustrative of the most frequent types of customer calling patterns, but is not comprehensive. Prices are based on a snap shot as at 22 August 2002. Although providing a sound overall picture, the comparison of companies within a country should not be taken as necessarily being representative for an individual consumer.

1.10 The analysis is based on a basket methodology, which allows prices to be compared across different operators in different countries. It is not, however, intended to be a buyer’s guide to services as:

• it provides only a snapshot of the price levels for a continually changing set of price packages; and
• the residential or business consumer will have to use more specific usage information in order to determine the best option for that person or business.

The objective is to illustrate the scale and level of prices available to consumers in different countries.

1.11 There are separate industry funded initiatives and reports which seek to help UK consumers be better informed purchasers of telecommunications services (examples are; fixed and mobile quality of service indicators – www.cpi.org.uk / www.oftel.gov.uk; advice to consumers on using a mobile abroad – www.oftel.gov.uk; and information for small businesses about using telecoms and the Internet – www.TelecomsAdvice.org.uk). Oftel has also recently produced a range of consumer guides and has introduced a seal of approval, called the Oftel PASS, for websites that compare the prices of different suppliers and provide impartial and accurate information – www.oftel.co.uk/publications/consumer/2002/pass0902.htm. This report is not part of that body of work as it seeks to compare positions between, not within, countries and it is not, therefore, intended in any way to be a buyer's guide to services in the UK.

Outline of the report

1.12 There are two subsequent chapters which present the results for:

• mobile services – domestic (chapter 2); and
• mobile services – roaming (chapter 3).

Chapter 2

Mobile services – domestic

Introduction

2.1 This chapter covers ‘domestic’ mobile services, ie calls made from mobile phones within the consumer's home country. Roaming services are covered in chapter 3.

2.2 Oftel completed a review of the mobile market in September 2001 and concluded that, for services bought by mobile subscribers, the market is prospectively competitive. This study will form part of the ongoing monitoring of the mobile market and the resulting time series will be used in subsequent reviews.

2.3 The results are based on prices as at August 2002 and provide an update of the results presented in the June 2002 report (based on prices as at February 2002). This study is the sixth in a series that started with a study carried out by Teligen for Oftel and published in May 2000 (based on prices as at February 2000). However, changes in methodology made in the second study mean that a consistent series is only available from August 2000 onwards.

2.4 This chapter follows broadly the same format as the previous reports and covers:

• changes in the UK market over the last six months;
• methodology;
• results (both with and without the cost of the handset) showing:
  – price indices for a range of residential and business baskets;
  – price movements over the last six months; and
  – charts which show the spread of offers by country;
• sensitivity analysis;
• detailed results by operator; and
• conclusions.

2.5 Detailed results for all tariff packages modelled can be found in annex C.

Market developments

2.6 Mobile phone ownership is stabilising in the UK. Results from Oftel's latest consumer research (carried out in August 2002) show 68% of UK adults and 61% of Small and Medium businesses (SMEs) claim to have a mobile phone.

2.7 Pre-pay packages continue to be popular with residential consumers, with 71% of residential mobile users using a pre-pay package in August 2002. This has risen from 67% in February 2002.

Methodology

2.8 The price comparisons are based on evaluating the costs for a range of different usage ‘baskets’ for the different tariffs available. The usage baskets are described in the June 2002 report.

2.9 The methodology for evaluating the price of each basket remains essentially the same as in other studies. Minor changes have been made to improve the modelling of tariff packages including bundled SMS, reflecting the increasing trend for tariffs with this feature to be offered.

Handset costs

2.10 In the June 2002 report, the main results presented were based on the price of a particular handset (the Nokia 3310), benchmarked in each country, with an average handset replacement time of 18 months. In this report, an average price over three handsets, which are relatively widely available in all countries (for both pre and post paid) is used. The handsets used are the:

• Nokia 3310;
• Nokia 3330; and
• Siemens C45.

2.11 Using an average price across these handsets, rather than relying purely on one handset, increases the number of observations and hence relies less on figures for any particular operator. In future the composition of the average may be changed (for example, as a particular handset becomes less popular), but use of an average will ensure greater continuity than having to replace a single handset with another. Although there are some differences for particular countries, in general it was found:

• the Nokia 3330 is a bit more expensive than the Nokia 3310;
• the Siemens C45 is very similar in price to Nokia 3310; and
• the average over all three is similar to/slightly more expensive than the Nokia 3310.

2.12 The prices used for the handsets are shown in table 2.1, where they are compared to the prices that were used in the June 2002 report. In general there is a good degree of consistency between the prices used in the June 2002 study and those used in the current study.

Table 2.1: Handset prices used

All prices in UK£ and including VAT.

2.13 The assumption of an average handset replacement time of 18 months was also re-examined. HI Europe carried out a survey of the mobile operators/service providers included in the report. The information provided suggested that 18 months continues to be reasonable assumption, and this has not been changed.

Results including handset costs

Price index

2.14 The price index (based on the average of the two cheapest packages from different operators in each country) is presented in table 2.2 for the best of all packages, irrespective of whether they are post or prepay, with the price of the handset included. Detailed results showing the cost of each basket for each tariff package modelled are shown in Annex B.

Table 2.2: Cost of mobile services (best of post and pre-pay packages, cost of handset included)

August 2002 prices.
Note: the average is a simple average of all the basket results.
Q1 = usage quintile 1 etc; day = mainly daytime; Off-peak = calls spread fairly evenly over day, evening and weekend.

2.15 From table 2.2 it is seen that as at August 2002:

• overall, UK prices are about average; and
• prices in France are about the same as those in the UK, prices in Germany and Sweden are between 4% and 6% cheaper while prices in Italy are around 27% more expensive.

2.16 The UK's position has improved slightly since February 2002 and the main changes between February 2002 and August 2002 are:

• there have been decreases in tariffs and handset prices in the UK;
• tariffs in France and Italy have stayed about the same while those in Germany and Sweden have fallen; and
• handset prices have increased in France, stayed about the same in Italy and Germany (post-pay) and decreased in Sweden and Germany (pre-pay).

2.17 Italy continues to have the highest prices. However, use of multiple SIM cards (to reduce mobile call charges) is easier in Italy than in the other countries (as there is no handset locking), and it is possible the methodology used in this report (which assumes a single tariff package is used) overestimates the prices available to consumers in Italy.

Packages included in the index

2.18 It is also useful to consider the price index results in the context of the types of package that have been chosen as being least cost.

2.19 Table 2.3 shows whether the least cost packages are post or pre pay.

Table 2.3: Type of package included in price index

The table shows: cheapest package [pre or post]/the second cheapest package (from a different operator) (pre or post).

2.20 In general, the trend is for prepay packages to be cheaper for low volume users, while postpay packages are cheaper for higher usage. However, there are significant variations by country:

• in Germany, the index is composed of postpay packages for all baskets, and in Sweden the index is very largely composed of postpay packages;
• in France, post pay packages feature partially at low usage and for all high usage; and
• in Italy and the UK, the index is composed of pre-pay packages for all but the highest usage quintiles.

2.21 The overall pattern of type of package that is cheapest, is similar to that as at February 2002.

2.22 The vast majority of packages chosen for the index are available to both business and residential consumers. A small number of business packages feature in the index for the higher usage baskets.

Time trend

2.23 The results in table 2.2 indicate that the UK's relative position has moved relative to that based on February 2002 prices, reported in the June 2002 study. The percentage changes in price between February 2002 and August 2002 are shown in table 2.4.

Table 2.4: Percentage change in price levels between February 2002 and August 2002