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Data is new cash stream for telco firms

Tuesday, February 26 11:33:09

European telecoms companies who have watched with dismay while phone bills shrink are hoping new price plans that emphasise data will win back revenue from smartphone and tablet users making fewer calls but spending more time online.

Average mobile phone bills in Europe have fallen by 15 percent since 2007, even as they have risen by 25 percent in the United States. European users now spend an average of just 24 euros a month on their mobile phones, according to Sanford Bernstein. Americans spend about two thirds more.

But what is good for consumers' wallets is bad for firms, who grumble that unless they can make Europeans pay higher bills, they won't have the funds to build fast 4G and fibre broadband networks needed in the tablet and smartphone era.

For years, mobile phone operators have made most of their money by charging users for voice call minutes and text messages, perhaps with a mobile data plan thrown in.

But voice calls that made up more than 80 percent of revenue in 2007 now account for just 62.6 percent of cash flow for European firms, according to research firm Informa. Meanwhile, data volume is expected to double each year until 2015, according to industry group GSMA.

While details differ, European companies are all trying focus monthly charges on the part of their business that is growing - mobile data. But in highly competitive markets, few have yet found a formula to prod consumers to spend more.

"We understand better now how to price mobile services and data," said Gervais Pellissier, France Telecom's chief financial officer. "But not everything has been sorted out yet."

Firms like Vodafone and Telenor are responding by bundling unlimited voice and text messages with packages that vary in price based on how much data a customer wants. Others, like France Telecom and Britain's EE, charge a premium for the fastest 4G data speeds.

Eventually, European companies may follow U.S. firms in offering shared data plans, which let individuals and families buy data allowances that they can use on more than one device.