Cheaper mobile plans drag down telco revenue

Vodafone is earning less from each mobile phone customer and adding fewer new customers.

The British-owned phone company said its revenue per user had dropped from $51.20 in the three months to June 30 from $46.60 in the previous quarter because of more customers using lower-priced calling plans and a cut in mobile termination rates charged to Telecom.

Vodafone added 32,000 new customers in the quarter - most of them to low-cost plans - down from 44,000 in the previous quarter and 38,000 in the same quarter last year.

The company now has about 2.1 million customers and 52 per cent of the market.

Telecom - which has the remainder of the mobile market in New Zealand - is also expected to report lower mobile subscriber growth and declining revenue per user when it releases its annual results next week.

Macquarie Equities analyst Steve Hodgson said the number of Telecom and Vodafone mobile phone subscribers had fallen, reflecting a market penetration rate by mobile phone companies of more than 90 per cent.

Hodgson expected most of Telecom's new customers would also have signed on to lower-priced mobile calling plans.

"The telcos want to roll out high-speed networks," he said, "pinch important customers from competitors and upsell important customers to better devices to increase their revenue," he said.

Vodafone chief executive Russell Stanners said a main cause of the drop in revenue was Vodafone's decision to cut its termination rates - the fee it charges Telecom for calls made from Telecom landlines to Vodafone cellphones - at the start of April by 23 per cent, from 26c to 20c per minute.

But Telecom had not reduced its fixed prices in line with the discount..

Telecom spokesman John Goulter said fixed-to-mobile and mobile-to-mobile calls "have been coming down".

Telecom would expect to see the prices drop in the new regulated environment.