Has O2 missed a trick with its 4G service?

MoneywiseEditorMark's picture


Am I the only person disappointed by O2’s announcement that it is entering the 4G market?

Not because I have anything against O2 or 4G – I was an O2 customer for close to a decade – but because it appears as though it is pricing its ultra-fast mobile service at exactly the same level as current monopoly provider EE.

Frankly, £26 a month is a bit steep for me – and I’m not alone. I know few people who are paying for 4G, outside of their work phones.

So I’d been looking forward to a newcomer entering the market, launching a competitively-priced rival to EE and helping drive down prices for consumers.

But at first glance, that looks unlikely.

When EE became the UK’s first provider of super-fast 4G services, it came as something of a surprise. Ofcom had been talking about an auction and most of us presumed two, three or four of the major mobile phone network providers would be granted a license after handing over huge sums of money to the telecoms regulator.

In the event, Ofcom granted EE sole permission to operate 4G services in the UK way back in September 2012 (though it wasn’t ready to roll it out until October last year) because EE was much further advanced with its 4G infrastructure.

It infuriated the likes of Vodafone and O2, who had to sit back and watch a rival steal market share from under their noses, powerless to act until Ofcom allowed them to join the fray.

Consumers also lost out, because with only one operator in the market, anyone desperately wanting 4G had no choice but to pay EE’s prices.

In February this year, three other mobile phone network operators were finally granted a 4G license in a deal that netted the government £2.3 billion.

The first to announce its service is O2, which has said it will launch 4G on 29 August 2013 – great news for consumers. Except a quick look at O2’s press release reveals the company is planning on pricing its 4G service at £26 a month – the same as EE’s cheapest tariff.

Admittedly, O2 has not revealed further detail on prices, but if its minimum tariff really is the same as EE’s, it means consumers must continue to pay what I believe is an inflated price.

Why on earth didn’t O2 price its 4G at, say, £25 a month? Even £1 a month cheaper would have been sensible – new customers know where they can get the service cheaper and EE customers have a rival worth switching to.

As it is, is anyone seriously going to defect only to pay the same price? And will other consumers choose O2 over EE when they are both the same price.

I really think O2 has missed a trick here. Perhaps we’ll have to wait until Vodafone finally launches its 4G proposition. But in case the marketing boffins at Vodafone are reading, here’s a tip: shave a little off O2 and EE’s prices and you’ll do well.