Breaking News

Oscar Pistorius Sentenced to 5 Years in Prison
Tweet TWEET

Austrian Operators See Data Hunger as Chance to End Price Battle

As the consumption of data rises, Austrian mobile operators see an opportunity to end the price battle that has been weighing on their results for years.

Telekom Austria AG (TKA), one of the two European phone companies part-owned by Carlos Slim’s America Movil SAB (AMXL), introduced new tariffs today, charging customers based on the transmission speed and volume of data they choose. So far, Austrian operators have mainly offered flat-rate tariffs.

“This is a big sign to the competition and a considerable raise compared to older tariffs,” said Bernd Maurer, a Vienna- based analyst at Raiffeisen Centrobank. The country’s operators are now trying to generate profit from the consumption of data, he said.

For years, four mobile operators have battled over an Austrian population of about 8 million. Average monthly revenue per user declined from more than 37 euros ($47.47) in 2005 to 17.40 euros in 2012, according to data compiled by Bloomberg. Wireless expenditure as a percentage of gross domestic product per capita is the second lowest of developed European nations.

Orange Austria, which was recently bought by Hutchison Whampoa Ltd. (13), offers a contract for as little as 7.50 euros per month including 1,000 minutes, 1,000 SMS texts and “unlimited” data with a connection that slows after 1 gigabyte.

Jan Trionow, chief executive officer of Hutchison’s Austrian unit, said his company may soon introduce tariffs based on the quality of the data service that customers need, according to an interview published by Kurier. This product differentiation is important for the development of mobile infrastructure, he said, according to Kurier.

Heavy Investing

Austrian operators face a period of heavy investment as the country’s biggest ever spectrum auction is due to take place this September. Regulators expect to raise at least 526 million euros. Operators need the spectrum to develop their faster fourth-generation networks, which also requires investment in infrastructure.

“Operators need revenue to build effective networks,” Trionow said in response to e-mailed questions. It would cost Hutchison “triple-digit” million euros to build a nationwide 4G network, he said.

Telekom Austria, the nation’s biggest operator by market share, charges customers an extra 9.90 euros a month to use its 4G network. Companies that invest massively in new technologies, want to charge a reasonable price for it, CEO Hannes Ametsreiter said at a press conference today.

Driven by the spread of smartphones and tablet computers, Austrian consumption of mobile data almost quadrupled between 2009 and 2012. There definitely is a “hunger for bandwidth,” Ametsreiter said.

“The consumption rises and clients have to pay for it,” Karim Taga, managing partner at consulting firm Arthur D. Little in Vienna, said by telephone today.

International Examples

Data will become a more important aspect for tariffs, said Helmut Spudich, a spokesman for Deutsche Telekom AG (DTE) unit T- Mobile Austria. “There is a number of international examples for this,” he said in a phone interview today.

Telekom Austria offers unlimited voice and text messaging with its new contracts. The risk for operators doing this is low, said Spudich. “The usage has already peaked. There probably won’t be more calls just because they are included.”

Average revenue per user will probably stabilize in the future, said Maurer. “We are not talking about rising revenue yet,” because customers will be reluctant to trade their old contracts for more expensive ones, he said.

T-Mobile Austria raised prices for some of its contracts by 15 percent on average at the beginning of this month. That caused Telekom Austria’s shares to climb more than 5 percent on March 5 as Carola Bardelli, a Milan-based analyst at Deutsche Bank, predicted Telekom Austria’s main A1 brand may follow suit.

Telekom Austria shares fell 0.3 percent to 5.12 euros today in Vienna, and have declined 11 percent this year.

To contact the reporter on this story: Alexander Weber in Vienna at aweber45@bloomberg.net

To contact the editor responsible for this story: Mariajose Vera at mvera1@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.