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Austrian Mobile-Service Prices Rise 11% After 2013 Merger

Jan. 16 (Bloomberg) -- Austrian mobile-phone service became more expensive for the first time in at least three years after a takeover reduced the number of competitors, a regulator said.

Depending on the type of usage, the fees increased by a range of 6.6 percent to 11 percent in the fourth quarter, the Vienna-based telecommunication watchdog, known as RTR, said in a statement today. The charges are still 10 percent less than in early 2011 and are cheap compared with the industry in other countries because of several rounds of price cuts, RTR said.

The price increases cap a period in which the average monthly revenue that mobile operators in Austria generated per customer fell steadily to 17.50 euros in 2013 from 37.30 euros in 2005, according to data compiled by Bloomberg. The number of service providers shrank to three from four after Hutchison Whampoa Ltd. completed a 1.3 billion-euro ($1.8 billion) takeover of Orange Austria at the beginning of 2013.

“There’s an obvious context of the merger,” even if it can’t be proved that the Hutchison-Orange combination led to the price increases, Georg Serentschy, the head of RTR, said at a press briefing today. “I wouldn’t be surprised” if charges were to rise further.

Austria’s three operators -- Hutchison, Telekom Austria AG and Deutsche Telekom AG -- paid 2 billion euros for airwaves they bought for next-generation technology late last year in one of Europe’s costliest spectrum auctions. Standard & Poor’s and Moody’s Investors Service both cut Telekom Austria’s credit rating by one level in October, saying that spending on the frequencies was higher than expected.

‘Not Consistent’

“The historically low prices weren’t consistent with the higher than average costs for staff and network,” Hannes Wittig, an analyst at JPMorgan Chase & Co., said by phone. “Game theory suggests that players in a three-player market behave more rationally than in a four-player market.”

Telekom Austria rose 1.3 percent to 6.60 euros at the 5:30 p.m. close in Vienna. That brought the stock’s gain this year to 20 percent, the best performance in the 24-member Bloomberg Europe Telecommunication Services Index. Earlier this month, the company said it will raise prices at its no-frills brand Bob by as much as 70 percent.

Of 24 analysts surveyed by Bloomberg, two suggest buying Telekom Austria stock, 13 recommend holding it and 9 propose selling it. Analysts at UBS AG raised their recommendation to buy from hold on Jan. 13, citing “signs of some rationality returning to the Austrian mobile market.”

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

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