Joanna Wells’ Post

Telstra is making a significant shift in its pricing strategy, abandoning its previous model that linked prices to the Consumer Price Index (CPI). This move is part of a broader restructuring effort that includes cutting 2,800 jobs to streamline operations and reduce costs. Previously, Telstra’s prices for services like postpaid mobile plans increased annually in line with the CPI. This predictable model is now being replaced with a more flexible value-based approach. In essence, this means they will be moving to a system of adjusting prices based on the value delivered and perceived by customers, and customer needs rather than inflation alone. Their upcoming CPI-linked price increase, scheduled for July 1, has also been cancelled as part of this shift. Will this lead to higher prices for mobile services? There will inevitably be higher prices as a result of this new approach but there should also be lower prices too as the perceived value of a given mobile service varies by customer segment. The advantage here is the increased ability to adjust prices based on market conditions rather than just on 1 CPI index. The difficulty is defining the right inputs and understanding new outputs and metrics.  The Australian Competition and Consumer Commission (ACCC) will inevitably monitor these changes. The federal government has expressed concern about the potential impact on consumers and has tasked the ACCC with ensuring that Telstra’s new pricing strategy complies with competition laws and consumer protections.  Like anything new, there will be uncertainty over what future mobile phone subscription pricing actually looks like for customers. Overall, then, this new value-based approach could enable Telstra to better navigate a dynamic market at a more granular level if they do it properly. The journey to get there from where they are now will not be easy. Do they have the capability, teams, systems and culture they need to make this successful? The culture may not be great when they are laying off thousands of people. #pricingnews #taylorwellspricing Source: https://lnkd.in/gyX76vEP

Telstra’s flirtation with inflation indexed mobile pricing has been paused. Introduced in July 2022, linking mobile prices rises to inflation has been a way to justify price increases to customers, and is an attempt to cease the downward momentum that tends to see scale, network and operational efficiencies passed on to customers.   Telstra borrowed the idea from UK operators where consumer price index adjustments have been implemented across both broadband and mobile services. Indeed, in the UK, annual price adjustments are commonly CPI+3.9%. The pricing model has been replicated in other markets such as Ireland and Spain. Ofcom may end the practice in the UK, proposing a ban in December 2023. Ofcom’s concern is that the mid-contract price increases are inherently uncertain, and thus are unfair to consumers, particularly during periods of high inflation. The pricing model works best when widely adopted within a product segment, but this can look a lot like collusion. With Telstra’s competitors not adopting an equivalent model, Telstra has returned to a "flexible" approach. Competition wins.

Telstra recently announced a shift away from CPI-linked increases to a flexible, value-based pricing strategy. However, the upcoming price hikes raise questions about whether Telstra is truly implementing value-based pricing effectively. Telstra plans to increase prices on the 27th of August, 2024. For post-paid plans, the Basic plan will rise from $62 to $65, the Essential plan from $72 to $75, and the Premium plan from $95 to $99. Pre-paid plans will also see changes, with the 15GB plan increasing from $35 to $39 effective October 22, 2024. The 165GB plan for 12 months will rise from $320 to $350. The price increases aim to balance cost-of-living pressures with the need to invest in technology and network improvements. The pricing challenge lies in ensuring that the proposed price increases genuinely reflect added value for customers. Their decision to remove data speed caps on lower-tier plans could enhance perceived value. However, higher costs are still likely to deter price-sensitive consumers or those already facing economic pressures. In essence, while Telstra’s recent pricing adjustments demonstrate elements of a value-based approach by linking prices to service enhancements, the true test will be how effectively these changes resonate with customers. Success in value-based pricing requires an iterative scientific approach based on ongoing and objective customer value research, detailed analytics and optimisation i.e. a delicate balance of pricing strategy, customer value management, and ongoing adaptation to market conditions. This is the backbone of value-based pricing. 

📱💲 Telstra’s Mobile Price Hike: What You Need to Know Months after assuring customers there would be no price increases in July, Telstra has announced a hike in mobile plan costs starting in August. 📈⬆️ 🚀 Price Changes Details: - Increase by $2 to $4 per month on most plans and pre-paid offers. - Effective Dates: August 27 for post-paid customers and October 22 for pre-paid users. - Data Speed Cap Removed for the two cheapest standalone post-paid plans. Why the change? Telstra cites high living costs and a need to invest in its network as reasons for this decision. 💬 From the CEO: In March, CEO Vicki Brady committed to not linking price changes with the CPI, promising a timely and transparent review of pricing. Today, Telstra reaffirms its commitment to balancing cost of living pressures with the need to invest in technology and customer service. #telstra #australiabusiness #mobileplans #telcocommunity #networkinvestment #datacaps #CPI #costofliving Feel free to share your experiences or ask any questions! Your engagement matters! 🙌

The UK’s biggest telecoms providers are lining up above-#inflation price increasesfor #broadband and #mobile customers that will add almost £500m to consumers’ bills from next spring, according to a new estimate. #BT, #EE, #Vodafone, #Virgin-Media #O2 and TalkTalk are to increase bills for more than 22 million broadband and mobile phone customers under “mid-contract” price rise clauses from April and May next year. The practice, which is not allowed in other utility sectors such as electricity and gas, involves increasing bills by using either the consumer price index (#CPI) or retail prices index (#RPI) measures of inflation, and then adding almost four more percentage points on top of the official rate. Research by the consumer group Which? estimates that telecoms firms will generate £488m from the 2024 mid-contract price rises, which will be set based on the inflation figures for December, released in January. The rate of inflation fell to 4.6% in October, compared with a CPI rate of 10.5% and RPI rate of 13.4% last December, but two years of steep bill increases will hit cash-strapped households. Which? based its calculation on #BankofEngland forecasts of 4.5% CPI inflation in December, and the Office for Budget Responsibility’s (#OBR) prediction of 6.5% RPI inflation for the same month. Which? and #CitizensAdvice have written to the telecoms regulator, #Ofcom, calling for a ban on mid-contract price rises as part of its review of the practice that it launched in February. Which?’s director of policy and advocacy, Rocio Concha, said: “It is absolutely unacceptable during the most severe cost of living crisis in decades. Ofcom should ban the unpredictable price rises and give people certainty about exactly how much their contract will cost when they sign up.” For the next round of price rises BT, which owns EE and Plusnet, and Vodafone will add 3.9 percentage points to the rate of the December CPI. TalkTalk will add 3.7 percentage points. Virgin Media O2 is to add 3.9 percentage points to the December rate of RPI, which is typically several percentage points higher than the CPI rate, across its broadband and mobile businesses.

UK regulator Ofcom is cracking down on inflation-linked mid-contract price rises imposed by mobile operators such as Three UK, EE, Vodafone and Virgin Media O2. “In recent years, pricing practices where providers impose an annual rise linked to unpredictable future inflation, plus an additional percentage of typically 3.9%, have become significantly more widespread, undermining customers’ understanding of what they will pay.” This means customers can be subjected to a 3.9% + a variable, unknown, inflation rate linked increase. Even as I’m writing this, I’m getting confused. 🫤 And with inflation rates as high as they have been in the U.K. recently, consumers are seeing a 10%+ increase in their bills. “Our analysis of providers’ data shows that as of April 2023 four in ten (11 million) broadband customers and over half of mobile customers (36 million) were on contracts subject to inflation-linked price rises. So many of the U.K. market is at risk of these increases.” The scary part is how unclear customers are about this increase mechanic: “However, awareness and understanding of these terms is very low. More than half (55%) of broadband customers and pay monthly mobile customers (58%) do not know what inflation rates such as CPI and RPI measure. And of those who are with providers that use inflation-linked price rises, very few broadband (16%) and mobile customers (12%) were both aware of the price rise and able to identify that it was inflation-linked with an additional percentage.” We know that underlying costs for the operators are also increasing. Standard practice would be to, for example, increase annual salaries at least at the same rate as inflation. Supplier costs may also increase. And not to forget the spend to maintain and build out infrastructure. Recent analysis done by Vodafone and Three regarding their proposed merger shows that 90% of free cash flow generated in the U.K. mobile market is from EE and VMO2, with Vodafone at 10% and Three negative FCF. It is a challenging landscape, with no real good or bad guy. Ofcom needs to be seen as doing its part to control the cost of living crisis for consumers. But at the same time, costs for operators are most certainly increasing, which they must pass on to consumers in order to continue to support the maintenance and buildout of critical infrastructure that we all rely on every day. The one area that is most certainly required is transparency and consumer education regarding this inflation-linked increase mechanic, and it appears this is what Ofcom is most concerned about addressing with this latest regulation. #telecommunications #telecoms #inflation #uk

Telstra is shaking things up with a major business reset. Chief Executive Vicki Brady announced the removal of CPI indexation and a shift in pricing strategies. What does this mean for future costs and services? Explore the potential impacts of these changes in our latest blog. Read more: https://hubs.ly/Q02F7Tyy0 #Telstra #BusinessReset #TelecomNews #VoicePlus

I totally agree with the idea that consumers should have more transparency on mid-term #mobile price increases and the current practice of CPI or RPI plus 3.9% in April each year has led to some very large increases for consumers as well as businesses and wholesale purchasers like resellers. However, it would be good to see Ofcom extend their work beyond the consumer in this instance to also impose any agreed terms on both business and wholesale services, where these issues exist equally. The simple fact that the networks have largely all arrived at CPI or RPI plus 3.9% should raise more than a few eyebrows at Ofcom, however why announce this now and state that a decision will be made in Spring??? This guarantees that nearly all consumers and businesses will be hit with another inflation-busting 10% increase as the measurement month is Dec or Jan and it will be imposed in April. Come on Ofcom sort it out for once and stop dithering!! Make a determination, apply it across the board (as businesses and wholesale resellers are equally hit by this and have no power to negotiate it away) and get it done before the next increase comes and goes and don’t allow this to be delayed for another year.

BT has become the first major telecoms company to scrap controversial above-#inflation price rises for #mobile and #broadband customers – but not before pushing through a final increase this year. The owner of mobile operator EE has moved to address the pressure on consumers from rising household costs during the cost of living crisis, after #telecoms companies were criticised for increasing bills. The UK’s largest mobile and broadband companies were accused of fuelling “greedflation” after a #Guardian investigation last year found they were pushing through above-inflation price rises. EE said customers will now be told clearly in “pounds and pence” the planned increase to their monthly bill from next year. The move comes a day before the official inflation figure for December is revealed, which most operators use to set their mid-contract price increases for customers. Analysts have estimated that this year’s round of price rises will add almost £500m to consumers’ collective bills from spring. #BT, #Vodafone, #Virgin-Media #O2 and TalkTalk all use a version of the mechanism, which usually takes the consumer prices index (#CPI) measure of inflation plus about 3.9%. However, Virgin Media O2 uses the higher figure of retail price inflation (#RPI) taken from the rate published for January. Last year, most mobile and broadband tariffs rose by 14.4%, although Virgin Media O2 customers faced a 17.3% rise, based on December 2022’s CPI figure of 10.5% and January 2023’s RPI at 13.4%. This year the expectations are that December CPI will be about 4% with January’s RPI forecast to be in the range of 6.5%. The move, which comes months before a ban from the telecoms regulator #Ofcom on companies imposing inflation-linked price rises in the middle of a contract, will put pressure on BT’s rivals that use the practice to follow suit. “Our annual price change is never an easy conversation to have with customers, particularly when so many people are dealing with the cost of living crisis,” said Marc Allera, chief executive of BT group’s consumer division. “We’re listening, and we’ve taken this on board. [We will] instead offer a clear and simple view of any changes in ‘pounds and pence’.” BT said that in 2025 mobile customers can expect a monthly increase from £1.50, and broadband customers from £3, depending on the specific contract they are on. Research by the consumer group Which? Estimates that telecoms firms will generate £488m from this year’s mid-contract prices rises.

Many mobile telecoms operators that have entered the fixed market have struggled to gain customers in an organic way. The key challenge is to persuade competitors' fixed customers to churn. We analysed the strategies adopted by 10 mobile operators to launch fixed broadband services. We identified best practices and actionable recommendations. Discover more in this article. #broadband #churn #mnos #strategy #telecoms