Being Stung by Unlimited Mobile Plans

Budget Plan Launch

Having covered the Australian prepaid mobile market for over 4 years now, the launch of several low cost or budget prepaid mobile unlimited services over the past year has really shaken and the market and unfortunately left it rather bruised.

Unlimited prepaid mobile plans have been popular in Australia for some time now. When Red Bull Mobile launched their range almost 2 years ago, they took the industry by surprise with their unlimited plans plus extended credit expiry periods eg pay $365 upfront and enjoy unlimited calls and 5GB of data each month for a whole year. Up until this time, prepaid unlimited only ever carried a 30 day expiry, Red Bull took a more European approach and made all of their plans unlimited. Credit expiry ranged from 10 days to 365 days, each with a slightly different price point. Up until the end of 2012, the model worked well and the feedback from customers was generally positive.

The latest range of players took a much different approach. What they saw was an overpriced market that needed shakeup and the beneficiaries would be the consumer. They also saw a market with mobile data limits that where shrinking not growing so they decided to boost value through extraordinarily high data limits. The result was over 250,000 customers in under 6 months. Ultimately however they had plans to sell customers much more than just mobile plans. Hardware and groceries were where the lower margins were going to be made up.

Early Success

It is not hard to see why the launch was so successful. With Australia holding one of the highest smart phone ownership rates in the world, mobile users are crying out for better data options. What unfortunately had been happening of late was is that plans had been shrinking their call and data allowances, not growing them.

The cracks started to show early on however when disagreements between wholesale providers lead to important restrictions being put into place to limit data usage. Daily limits where introduced as well as limits covering how much data could be consumed continuously with no break in data session. Then prices jumped 10 – 20%.

What ultimately undid the whole arrangement however, was that the underlying wholesale service providers had a major falling out over pricing. Unpaid and disputed billings mounted as the client based just simply kept on growing. Consumers just wanted a better deal and whilst pricing had risen, it was still the best out there.

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Quick Downfall

When you offer a customer unlimited mobile calls and TXT/MMS services plus 5GB data each month you can’t expect them to not want to use as much of it as possible. Whilst some reports are saying that the average user consumed only 250 minutes of call time, 200 TXT and 500MB each month, there are also many who sat at the higher levels of usage. What these users did is allow the arrangement that held the plans together literally to "bleed to death".

The wholesale pricing disagreements entered a territory where over A$10 million was now outstanding. Through court action, the plans were shut down and the wholesale reseller entered voluntary administration and eventually was sold off.

The pain felt by customers who where kicked out their plans was the frustration of having to find another plan, pay for a new recharge period, wait for the number porting to be completed and then seek a refund for their unused credit.

Whilst the launch of these budget unlimited plans focused on giving everyone a great deal, it eventually sucked them in and spat them out, leaving a bitter taste in everyone's mouth. The underlying motive was to sell them new hardware or more groceries and use this to make up the shortfall lost in the budget mobile plan pricing. The model didn’t work because the underlying wholesale service providers simply saw their revenue base shrinking with the mass of customers shifting to these budget services.

The prepaid mobile industry has suffered a direct hit to its reputation which I think will take some time and many new plans to recover from. Customers will think twice about moving to such plans in the future.

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