O2 exploits opportunity created by competitors’ new roaming charges

Virgin Media O2 has confirmed it won’t be in introducing EU roaming charges, making it the only one of the four UK MNOs to do so.

EE, Vodafone and Three all announced plans last year to charge their customers a daily flat fee to use their data and minutes in the EU, with O2 staying silent. Faced with the moment of truth, however, EE and Voda decided to delay, citing vague testing reasons. Could the real reason have been that they knew this VMO2 announcement was imminent and they wanted to give themselves the option of making a U-turn?

“We’re starting the year by giving our customers some certainty: we will not be reintroducing roaming fees in Europe for customers on O2 or Virgin Mobile,” said Gareth Turpin, Chief Commercial Officer, Mobile, at Virgin Media O2.

“Unlike all the other major mobile networks who are bringing back roaming fees, we will not be following suit. With many Brits now looking to plan a trip abroad, we’ve got our customers covered and extra roaming charges will be one less thing to worry about.”

Nicely done, Gareth. That’s how to capitalise on a gift from your competitors. VMO2 just wants you to get maximum enjoyment from your richly-deserved winter holiday, you see. The company even did a cheeky survey of UK punters (1,000 of them, to be precise) and found three quarters of them plan to have travelled by this summer. It reckons the average family will end up blowing an extra £100 if they all roam with its competitors (£2x4x12).

Even more damaging for the other three MNOs is the inference that their move has not been brought about by an increase in wholesale rates. We still don’t know for sure either way but either VMO2 is swallowing the cost increase on behalf of its customers or the other three are guilty of fairly shameless opportunism.

“Virgin Media O2 has blown the roaming door wide open,” said Kester Mann of analyst firm CCS Insight. “Bucking the market trend to bring back charges, its decision to hold firm will raise eyebrows across the sector and is a blow to rivals. As EE, Vodafone and then Three each confirmed they would reinstate the dreaded fees, it left the door ajar for Virgin Media O2 to break rank and disrupt the market.

“This move could hit Three hardest. It was the first to begin to phase out roaming in 2013 and has assertively promoted its Go Roam offer as it looked to differentiate by overcoming common customer pain points. If it goes ahead with plans to bring back roaming in May, it risks undoing much of this effort.”

This is how competition is supposed to work. The reason companies don’t charge too much for their products is that, if they do, their customers will defect to a cheaper alternative. That’s also why we have an entire regulatory infrastructure devoted to preventing monopolies. Less publicised are cartels, in which supposed competitors coordinate to raise prices together, and it’s good to see the UK mobile market is apparently not comprised of one.