Vodafone UK's 5G launch is an excellent example of how operators can use network investments and pricing to reposition in the market. Vodafone UK has put itself in a strong position to compete with market-leader BT/EE, which launched 5G in May, for both high-speed mobile and fixed services, while its convergence strategy will intensify competition for BT/EE around integrated offers.
Vodafone UK has shown how a service provider can use investment in the network to serve as the foundation to launch a new technology, and either consolidate a strong position in the market or reposition to target new markets. In Vodafone's case, it can now aim to offer best-in-market fixed and mobile networks centered on convergence and 5G. Using a new technology to reposition in the market was last achieved in the UK by EE, which used an early 4G license award and aggressive network rollout to become market-leader for premium mobile broadband services.
Vodafone UK spent £4.5bn ($5.6bn) on modernizing its fixed and mobile networks and IT and billing systems, and now has a converged core network (which took five years to build) that carries all of its fixed and mobile traffic, and which enables it to offer FTTH, 5G, and IoT services. As a result, Vodafone UK, like EE, can claim the best 4G network in the UK, and own-record-setting consumer satisfaction and churn levels, achievements that have helped to propel it back to revenue growth for the first time in five years. EE has the advantage and the experience to lead in 5G, but with its early 5G launch and rollout plans, Vodafone has put itself in the position to compete for network leadership in the UK.
Operators' default position when they launch a new technology generation used to be to charge more for it. But 4G clearly showed that this strategy is only sustainable for the time when services are offered on an exclusive basis. When operators launched 4G and didn't look for near-term revenue increases just by charging a premium, they saw usage and subscriber levels increase, and were able to grow revenue by migrating users to higher-priced plans that offer more value, either through higher data allowances or exclusive content, or both.
Vodafone UK is one operator that has learnt what works on pricing a new generation of technology, including unlimited data and minutes. Like other 5G operators, Vodafone UK has rightly decided not to charge a premium for 5G access. Instead, it is following the approach led by operators such as Telekom in Germany and Swisscom in Switzerland, and will introduce speed-based plans for high-speed mobile services. While this approach will be new to UK consumers, the benefits are clear. Unlimited data (we've yet to see what the fair use policies will be) is obviously a good thing to offer consumers, leaving them to choose only how fast they want their network experience to be. Vodafone's 5G plans start at a very competitive £23 ($29) per month for rather slow 2Mbps speeds, rising to £30 for the fastest speeds. This is very competitive in comparison to the only other UK operator to detail 5G pricing. EE's SIM-only 5G plans currently start at £32 for 20GB of data, rising to £47 for 60GB.
And more than upsetting the UK market on mobile prices, Vodafone's converged price plans indicate, like its network strategy, that it is making its best challenge yet on the UK market for converged services, which so far lag many other European markets in terms of offer and uptake. Called "Vodafone Together," the converged plans combine unlimited mobile plans and home broadband on one bill which can be managed from the My Vodafone app. Prices will start from £50. By comparison, BT's converged "BT Plus" price plans start at £62 per month for just 500MB of 4G data (excluding the slightly confusing 500MB "data boost" offer) and high-speed fixed broadband. In terms of converged services, BT has yet to fully harness the potential of its EE acquisition at the level of consumer convergence offers, and Vodafone's new strategy should give it cause to look again at how it approaches these plans.
5G: Regional and Global Approaches to a Technology Step Change, GLB007-000092 (July 2018)
5G: Impact and Opportunities, GLB008-000001 (January 2019)
Paul Lambert, Senior analyst, Europe