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UK Prepay vs Contract: A complete joke!

The pre-pay (pay as you go) in the UK is an absolute joke, I have been looking at what is on offer and it really flocked me off. I checked my email today and in it was a weekly email from Martin Lewis (of Money Saving Expert), and it was details about the cheapest pre-pay provider here in the UK. As the podcast team reported a few weeks ago from the 1st of September ASDA are the cheapest provider at (8p per minute and SMS at 4p).

My rant comes in two parts: –

1. Why can MVNO’s such as ASDA and IKEA (the second cheapest provider) provide such good call value, yet their host networks Vodafone and T-Mobile are able to put UP prices a few months ago to 20p a minute? I know that the MVNO’s must be putting the price close to the wholesale price as the possibly can to get market penetration, however your average ‘normob’ is losing out. The other thing is that out of contract my call price is 20p; however Ewan can vouch that on Vodafone it can be up to 35p. It infuriates me that as contract customers we are being charged up to over 4 times the rate as a prepay customer on a MVNO on the same network.

2. It is actually cheaper to ring Poland, USA, China or Australia on Lebara (who uses Vodafone) at 4p per minute then it is to ring my next door neighbour at 10p per minute on Lebara. I know the ethnic MVNO’s use VOIP for the international bit of the call, however I think it is ridiculous that is cheaper to ring the other side of the world then it is to someone in the same country.

It’s not all negative there is a real hope that there will be a price war (hopefully the traditional MNO will be forced to join in) now that the cheapest pre-pay providers are the virtual networks.

Hopefully those of us on contract will not be left out as well. (Well I can dream can’t I?)

By Ewan

Ewan is Founder and Editor of Mobile Industry Review. He writes about a wide variety of industry issues and is usually active on Twitter most days. You can read more about him or reach him with these details.

12 replies on “UK Prepay vs Contract: A complete joke!”

A quick reply
1) Those MVNOs buy in bulk. If you were prepared to pay in bulk, you'd get a discount. It's the same reason your supermarket sells Heinz Beans cheaper than your corner store. As for the out of bundle costs, if you take 600 mins @ £25pm, the cost is ~4ppm (plus you get the texts). Once you're out of the wholesale rate – you're back to paying retail.

2) In actual fact, it's cheaper on Vodafone Prepay* to ring China and Poland than it is to ring your local Chinese takeaway or Polish deli – http://www.vodafone.co.uk/international – 5ppm to landlines in Croatia, Czech Republic, Hungary, Poland, Romania, Lithuania, Latvia, Slovakia, Thailand, Turkey, China, Hong Kong, Russia, Nigeria, India, Pakistan. Why? Two reasons
i) It's genuinely cheaper to call those countries. You'll notice that most of the places are places where your pound/euro buys a lot. It's cheaper to buy a can of Pepsi there. Whereas the UK has high termination rates, these countries' rates are cheaper.
ii) Capitalist Supply and Demand. There are lots of Poles, Pakistanis, Slovakians etc in this country and they all want to ring home. They don't have the ability to pay BT's 50ppm (or whatever it is). So, supply and demand.

So, if you want a price war – move to the cheap MVNOs. Play the supply and demand game. However, it's cheaper and easier for networks to sell wholesale to MVNOs than it is to deal with you directly. That way leads us back to the market conditions of the late 1990s.

T
*Other providers are available 🙂
(Not speaking for my corporate masters – Vodafone)

Did you know that Virgin mobile charges 5p/Kb for data access!? Yes you did read that correctly. And there is no cap.

One of the things I've been trying to work out in your “Part 2” is how O2 can charge 20p p/m outside my Allowance of 600 minutes. But yet charge 17p p/m for me to call Germany. (OK I have ITS-International Traveller Service) but thats Free with my plan!

This is actually my rant which Ewan published so I am going to reply to the points you raise.
1) I fully understand your point, I get it to a certain extent. However ASDA announced it was reducing prices at the same time Voda was increasing them. That is what is annoys me a hell of a lot.
2) Yeah I take your point on termination rates but it still just shows up how odd the market in the UK here in the that it is cheaper to call abroad then it is within your own country. It would be great if some of the readers could comment how it it works in their own countries!

I definatly want a price war, I think if any of the MVNO's can make a difference it is Asda, I don't think Ikea have distribution power and brand power. Only time will tell but I hope people will ditch the traditional MNO and switch to the MVNO's. The mainstream press are picking this up and with sites like Money Saving Expert highlighting no real difference between Voda and Asda ie they will get the same signal, just a different CS and with the current credit crunch people are looking to reduce costs. There is little reason for them to switch.

The drivers are different for an MVNO like ASDA & a MNO like Voda. ASDA are running a multi product business where they can afford to offer some products at or near cost to drive footfall & sell other products. Voda is in the business of selling minutes, data etc. Different business models.

I must say very Good point. But! Operators like T-mobile and Vodafone are global and parent company has loads of money. They dont need to charge 10p/12p for a text message. or 35p to call other Networks. We are one of the most expensive countries in the world. Anyway… It's just wrong!

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