3 and UPC are up as Vodafone and Eircom fall

bealtine

Independent's analysis of latest Comreg figures:

http://www.independent.ie/business/technology/winners-and-losers-3-and-upc-are-up-as-vodafone-and-eircom-fall-30588688.html

watty

But Three makes no money, sells data below cost and outsources all engineering. The Hong Kong owners have deep pockets, that's the only reason they were able to take over O2.

So much for soft touch regulation and leaving it to the Market Place.

In the areas that have UPC, they are usually the only High Speed broadband provider and as they don't use legacy Eircom Copper they can price below DSL.

So no surprise there.

croo

But Three makes no money, sells data below cost

I was wondering about this question and I noted it when you mention it previously. Is that calculation of below cost based on the assumption that marketing data rates are delivered? If someone paid their €30 a month and got dial-up speeds that meant they were unable to use much of the "eat all you can" data allowances ... would it still be below cost?
I wondered because I'm not sure that there is any obligation to deliver the marketed speeds so the real world price being paid per Kb might be very considerably different to the marketing price.

I'm not sure if it is simply a co-incidence and it's is purely anecdotal but my 3g speeds seem to have become must lower while the connectivity seems reduce too since the take over of o2 by 3. 3g is the only option where I am and even so I'm at the edge of the service. I'm only 10 miles from Mullingar but I seem to be in a small black spot in terms of connectivity - too far for DSL, too many trees surrounding me for line of sight FWA. I don't fancy dealing with 3 support so a switch is in the future - but there are not many options ... vodafone look like the only alternative. Well Meteor do have masts in the area but after the mess Eircom made of our broadband I would not spend a single cent with them.

Anyway, the point was the low speeds made me wonder about your assertions re costs of mobile data.

watty

It's not much to do with speed unless you can't use up 1 G allowance. Based on 1G byte usage at about €20, then data COST is about 100 to 200 times €20 / 50 minutes of voice calls. Assuming you receive the same amount of calls as you make, approximately.

Voice is over charged a bit and SMS massively. Probably 1G of data ought to be about €40 for profitability, but that is more of a guess.
Almost ALL Data is a cost to Mobile Operators. What % of web sites do the Moble Operators host? They pay for all data entering and leaving their network.

They don't pay anyone for voice calls or SMS on their own network and they get paid for incoming voice or SMS unlike computer Internet data. Look at what Data prices were before iPhone. Then it was priced to make a profit. Most of the traffic was business users.

bk

watty wrote: »

Voice is over charged a bit and SMS massively. Probably 1G of data ought to be about €40 for profitability, but that is more of a guess.

I think that is way off. Look at the prices Tesco Mobile charge, €10 for 5GB. Tesco Mobile are buying this data wholesale from o2/3 and therefore probably realistically reflects the costs of data.

You see similar data costs on operators right across Europe, UK, France have very similar pricing.

I think it is just that you have gotten use to the price gouging by Vodafone/o2, those aren't realistic prices, prices were always going to drop significantly as technology improved and competition ramped up.

bealtine

bk wrote: »

I think that is way off. Look at the prices Tesco Mobile charge, €10 for 5GB. Tesco Mobile are buying this data wholesale from o2/3 and therefore probably realistically reflects the costs of data.

You see similar data costs on operators right across Europe, UK, France have very similar pricing.

I think it is just that you have gotten use to the price gouging by Vodafone/o2, those aren't realistic prices, prices were always going to drop significantly as technology improved and competition ramped up.

The estimate might indeed be "way off" but we have no way of knowing for sure, I, for one, suspect that there's a lot of cross-subsidization from the profits from voice, SMS and "roaming". SMS is essentially free to provide yet used to cost a lot.

I guess this is really an argument for mobile telcos to be more open and transparent with their cost bases just like "regulated" entities are supposed to be...

IT would be nice to see just how much data actually does cost?

Kensington

bk wrote: »

I think that is way off. Look at the prices Tesco Mobile charge, €10 for 5GB. Tesco Mobile are buying this data wholesale from o2/3 and therefore probably realistically reflects the costs of data.

You see similar data costs on operators right across Europe, UK, France have very similar pricing.

I think it is just that you have gotten use to the price gouging by Vodafone/o2, those aren't realistic prices, prices were always going to drop significantly as technology improved and competition ramped up.

Tesco Mobile is a loss-leader, much like Tesco fuel. It's sole or primary aim is not necessarily to turn a profit for its parent.

I think what is most telling is that in almost 10 years in operation here, H3G have yet to turn a single cent in profit.
They own little infrastructure (so little real investment cost/spend), outsource everything bar sales and marketing and have a not-too-shabby customer base (so lots of customer/revenue potential). They've sold hundreds of thousands of mobile dongles and always advertised themselves as the affordable data network - yet clearly it isn't returning for them.

Meteor on the other hand built up a network in-house from scratch, own much of their infrastructure today bar some along the western seaboard and broke much of the price gouging by Eircell/ESAT of the time with aggressive undercutting and established profitability within a few years of operation. Their aim wasn't on cheap data though, in fact it took them many months on-air before they even had a data network and at that it was only EDGE, their prime focus was on cheap voice/SMS.

billy111

'I think it is just that you have gotten use to the price gouging by Vodafone/o2, those aren't realistic prices, prices were always going to drop significantly as technology improved and competition ramped up'.

But aint Vodafone and o2 the only networks making profit? The other networks are reporting losses each year even with increasing their market share. Interesting to see where pricing will end up in the mobile market as 3, Meteor and E Mobile cannot sustain these losses with their cheaper price plans in the long term. The monetisation of data will play a key role in mobile revenue.

bk

I doubt Tesco Mobile is making a loss, they maybe low profit margin, but Tesco are no fools and they wouldn't be doing it at a loss.

Also given that Tesco give you unlimited calls, unlimited texts and 1GB of data for €15 (or 5GB for €20) they don't really seem to be using the revenue from calls and texts to subsidise data, instead it is almost like they are giving away calls and texts for free!

But that wasn't really the point, the point is that Tesco buy their data from o2/3 at wholesale rates. I assume o2/3 would only sell them that data at what they feel is an economic price.

Tesco then sells on the data to customers at a retail price of 5GB for €10. So even if Tesco is doing it at a loss (which I highly doubt), I can't see 5GB data costing more then €20 retail. Certainly no where near the €40 for 1GB that watty claimed above.

Vodafone is one of the richest companies in the world, they made over half a billion in profits last year. I'm not going to cry if they end up making a little less profit.

Of course I'm not at all against companies making profits, it is vital to innovation and development. But I do think the mobile carries have been profiteering and gold plating their costs and corporate structures to make the services need to be more expensive then they actually need to be.

I think the mobile network market is going to be entering a period of maturing and increasing commoditisation. The reality is that voice and text are just another form of data and I think the increasingly the mobile carriers will increasingly become just dumb pipes for data services and I believe will become a more low profit margin business.

Really no surprise, this happens in most technology based business.

The mobile companies need to adjust to this new reality. To cut their cost base, etc. Sure some companies won't be able to do that quick enough and will go under (e.g. o2). But new, nimbler companies with lower cost base, lower profit margins will emerge and take advantage (e.g. Free in France).

watty

What ever is the profitable level to charge, voice costs the Mobile operation less than 1/100th of data as they get paid for all incoming calls. Data they get charged for both directions per byte.

Three has mostly data customers and has never made a profit.
Tesco only needs to break even and most of the phones they sell are really for voice & SMS.

There is no transparency on costs. It will be interesting to see what happens to O2's wholesale customers. Tesco also only uses O2 masts and backhaul. Unlike other O2 resellers they have their own servers for billing, own voice gateway to PSTN and own data infrastructure.

Eircom senior executives admitted that Meteor pricing is set by Three pricing and they make a loss on Meteor/eMobile data packages /dongles, it's cannibalising their DSL which makes a profit.

Comreg are ignoring cross subsidy of Mobile Data, Mis-selling of Mobile as Broadband. This reduces investment in real Broadband and a serious market distortion. A mobile data dongle subscriber costs essentially nothing to install, yet dongles are mostly subsidised. A real Broadband Fixed Wireless subscriber install is €200 to €1000, where DSL can't reach or copper too long.

bk

I agree that voice and sms as separate charges is going to eventually go away as in the end they are just data. Specially with VoLTE and wifi calling and texting * just launched widely in ios8.

* Wifi calling and texting is where your voice calls and SMS are transparently forwarded over wifi instead of the mobile phone networks when you are connected to a wifi point.

Already something like 80% of all data generated by smart phones goes over wifi and wired broadband services.

With wifi calling and texting, even less traffic is going to be hitting the mobile carriers networks.

So yes, eventually I believe we will just be charged for the data we use.

But I don't think we will see the high charges for data that Watty is talking about above.

You are right, 3 Ireland hasn't made any profit yet, but I think that is because they are playing a very crabbit long term game. They see that the future is all purely data and that the big telecoms companies who in the past made massive profits for sms, voice minutes and expensive phone will fall as the mobile market becomes increasingly commoditised. And that companies with leaner operations like 3 and TM will benefit greatly.

As for your comment Watty about TM being only about calls and texts, you are very wrong. Just look at their website, the vast majority of the phones they now sell are smartphones. Right on their front page they have a massive advert, selling a contract with unlimited calls, texts and 15GB of data for €25! TM are heavily pushing data products now.

watty

I meant that till now (existing customer base) TM was mostly voice. In store they still sell some GSM only phones.

As long as calls going outside Tesco are about balanced by incoming calls to their customers, the "unlimited" calls and texts costs almost nothing.

The operator has PSTN gateways etc for voice. The data of voice isn't a cost at all leaving/entering their network.
Unlike data a high percentage of voice will be in network. no External costs.
For Voice if outgoing minutes from network and incoming minutes are about balanced there is almost no cost. They pay for outgoing, the originator pays for incoming. This applies also to OPERATOR supplied VOIP.

But Data all is outside their network. They pay for ALL traffic, in both directions no matter how originated. Only 3rd party VOIP counts as data. This is why they hate 3rd party VOIP. They lose out massively because their own voice system costs almost nothing (GSM. 3G codec or VOIP) if the overall customer base receives as many calls from outside the network as are made.

VOIP to destination end to end is only a cost advantage to resellers, telcos with no incoming traffic or end users. For traditional Telco, VOIP end to end is more expensive!

Also a problem is that capacity for VOIP is about 1/10th on 3G/HSPA rather than native codec with no IP overhead. The Mobile networks don't have enough cell capacity, they need x3 to x9 as many masts to have decent data capacity / speed

clohamon

bk wrote: »

And that companies with leaner operations like 3 and TM will benefit greatly.

Three can’t ever be lean. After the 4g upgrade and re-structuring costs the merged company will be paying > €60M pa in interest to its parent. If interest rates rise by just 2% that figure goes to > €100M pa.