T-MOBILE raised doubts about the future of cheap mobile phones yesterday when the company, one of Europe’s biggest operators, announced that it was withdrawing subsidies on its pre-paid handsets.
German-owned T-Mobile said it was no longer feasible to offer pay-as-you-go handsets at a fraction of the cost for which it bought them. Speaking at 3GSM, the industry trade conference in Cannes, Rene Obermann, chief executive of T-Mobile, said that prices of its pre-pay handsets were likely to be raised by “tens, rather than the hundreds, of euros”. He denied that a price rise would simply drive customers to cheap deals elsewhere.
T-Mobile maintained that the move, to be implemented first in its key British and German markets, would enable it to make calls cheaper.
However, analysts said that the move was part of an effort by the mobile companies to boost revenues and generate a better return after their billion-pound investments in third-generation licences. They said that rivals could follow suit, although that was denied by the other main operators yesterday. A spokesman for mmO2 said: “We will continue to offer a variety in the prices of handsets as we do at present.”
Analysts say that because mobile markets in the developed world had matured, the aim for operators was to boost revenue from individual users by locking them into long-term deals. Average revenue per user on contract phones is about €50 (£34) to €80 a month, compared with only €10 to €20 on pre-paid phones. However, 60 per cent of mobile users worldwide have pre-paid phones.
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Neil Mawston, of Strategy Analytics, the research group, said: “Cheap handsets are not going to disappear overnight. But the mission for the operators now is to get customers locked into contracts.”