More Trouble for 4G LTE Investment Models

Will fourth generation Long Term Evolution profit margins be sacrificed to speed mobile operator growth? It already is, in some instances.

You know what that means: increased difficulty for the 4G LTE investment decision, in some instances.

French mobile service provider Free Mobile has added an LTE 4G high-speed broadband service to its Free Mobile package without raising the price, in a market where its chief rivals charge a premium for using the 4G network.

Iliad says its monthly Free Mobile subscription remains unchanged at 19.99 euros a month including 4G, without a long-term contract.

Pressure on LTE profit margins is evident elsewhere as well. EE in the United Kingdom is bundling unlimited calling and texting when roaming in some European countries on 4G. Without necessarily eliminating a cost premium for using the LTE network, the “no incremental cost roaming” is another way of merchandising the LTE network without directly eliminating a cost premium on recurring service.

Hutchison Whampoa’s “3” in the United Kingdom has added an additional four countries (United States, Indonesia, Sri Lanka, and Macau) to its U.K. “Feel at home” roaming plan which allows United Kingdom-based consumers access to their respective voice and data allowances abroad. These new territories make a total of 11 countries where free roaming is available.

The obvious implication is that 3 is deliberately sacrificing potential revenue to grow its global presence, since roaming fees are a high-margin service, as Free Mobile is using the “no incremental cost” approach to take market share from other mobile operators in France.

The use of free 4G LTE roaming is part of Hutchison Whampoa’s effort to create a bigger global network. Three operates in Indonesia and Sri Lanka, but the U.S. market is the first country offering free roaming where 3 does not have a facilities-based presence.

The “Feel At Home” program  now operates in 11 destinations around the world.

For mobile service providers investing in brand-new LTE networks, the fact that some competitors are willing to offer the new service at no premium over 3G will make the business case for 4G harder.
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