EE’s recent move to reintroduce EU roaming charges led to alarmed press coverage. Was this a new post-Brexit cash grab on consumers wanting to enjoy a post-lockdown summer holiday?
We see EE’s pricing move as a rational response to EE’s release from a regulatory burden to provide supressed EU roaming rates. EE is now free to deploy more market-led and segment focused pricing strategies and we expect competitors to follow .
Roaming Charges Return for EE Pay-Monthly Customers
Under EE’s changes, new and upgrading pay-monthly sim-only and combined airtime and phone plans taken from 7th July will be impacted by new EU roaming charges. Affected customers will start seeing the charges on their bills from 1 January 2022.
- Daily charge: a £2 daily charge to use UK plan allowance (calls, texts, data) in the 27 EU countries + Norway, Iceland, Liechtenstein (EEA) + Switzerland (CH).
- Monthly charge: Pay-monthly customers have the option of avoiding the daily charge by taking a “Roam Abroad” roaming pass for £10. Roam Abroad is a 30-day rolling add-on, which can also be chosen as a “Smart Benefit” option with EE’s pay-monthly “Smart Plans” range.
Pay-monthly data-only plans will see the changes introduced for new and upgrading customers from 18th August.
A 50GB fair-usage allowance applies to those customers whose standard UK data allowance is greater than 50GB. Once the 50GB roaming fair usage allowance is consumed, a surcharge of £0.0036 per MB applies for the remainder of the billing cycle or until the customer returns to the UK.
Anomalies in EE’s New Roaming Approach
EE’s reintroduction of EU roaming changes comes with notable anomalies.
- Republic of Ireland roaming excluded: Pay-monthly customers can continue to use their UK domestic allowances when roaming in the Republic of Ireland (ROI), without incurring the daily charge. Understandably EE wishes to avoid complaints from Northern Ireland customers living near the border accidentally triggering the £2 charge when in range of ROI masts. It is also a more customer friendly approach for EE’s Northern Irish customers who might travel frequently into ROI.
- Roam Abroad pass covers additional countries: Customers taking the 30-day Roam Abroad pass will also be able to use their UK allowances in the USA, Canada, Mexico, Australia and New Zealand, in addition to the Daily Charge destinations of EU / EEA / CH. Roam Abroad is therefore a more valuable roaming add-on than its Daily Charge equivalent.
- Pay-As-You-Go customers continue to benefit from inclusive EU / EEA / CH roaming: The new charges apply to pay-monthly customers only at present. EE has not yet made announcements about when the new charges will apply to prepay customers. This includes customers on EE’s 30-day allowance bundles of voice, text and data.
EE Shifts Roaming from Regulatory Obligation to Value Added Service
Inclusive EU roaming was never a commercial choice for UK operators. Instead it was a regulatory obligation placed on them as part of the UK’s previous EU membership.
Although the overall benefit for UK consumers was positive by removing EU roaming charges, the usefulness of the range of countries included in the benefit was very mixed. Some EU destinations such as Spain and France are regular travel destinations for UK consumers, other EU destinations much less so.
Inclusive EU roaming also disproportionally benefited higher spending customers who regularly travelled, versus low or non-roaming customers.
EE is taking advantage of the expiry of this EU regulatory burden. It has the opportunity is to shape roaming into a more UK customer-centric value added service offering. Rather than segmenting roaming destinations into EU and non-EU, EE can position its Roam Abroad add-on as a useful and affordable travel zone of EU and popular non-EU destinations (e.g. USA and Australia). Roaming services can be shifted from arbitrary EU vs non-EU zoning, towards more tailored roaming services based around popular UK travel destinations.
Going forward roaming can be monetised via low daily charges for infrequent travel, or monthly bolt-ons for extended travel. High spending, frequent travellers can be served with inclusive roaming bundled with premium plans. This is a similar to Three’s previous positioning of Essential and Advanced plans, where Go Roam Around the World benefits (which included Australia, Brazil, Hong Kong, Indonesia, Israel, New Zealand, Singapore, USA) were exclusive to the Advanced range.
EE customers will pay more for roaming in EU countries than before the changes, but the additional charges are transparent, predictable and affordable. EE no longer has to force the cross subsidisation of maintaining EU roaming services from its non-roaming customers to its roaming customers.
What Will EE Do Next?
Going forward, we expect EE to build on this approach of inclusive roaming as a value-added-service in the following ways:
- Link the £2 Daily Charge to the £10 Roam Abroad pass: The £2 Daily Charge exists to nudge customers into taking the £10 Roam Abroad pass. However the daily charge is likely to attract resistance from customers who incur the daily charge for trips and holidays of 6 days or longer, as the cost will then be more than the Roam Abroad pass. We expect the Daily Charge to further evolve to be capped at £10 per billing cycle to equate to the equivalent £10 Roam Abroad add-on cost.
- Add additional destinations to Roam Abroad: Similar to Three’s Go Roam proposition, EE can build out its list of non-EU destinations that benefit from the Roam Abroad pass. The Roam Abroad pass can be made more valuable, and roaming revenue optimised as otherwise travel-savvy customers are more likely to disable roaming when travelling to these destinations versus consenting to paying standard per MB charges for data roaming.
- Bundle Roam Abroad as a premium plan benefit: Similar to EE’s Smart Plan strategy, Roam Abroad can be positioned as an inclusive benefit unlocked when customers take the top tier of EE pay-monthly plans.
- Offer Roam Abroad as a retention tool: End-of-contact customers at risk of churning from EE could be offered inclusive Roam Abroad as an upgrade sweetener.
- Extend Roam Abroad to Pay-As-You-Go: A mechanic of £2 per day capped at £10 per 30 days could also be used to offer inclusive roaming to pay-as-you-go customers.
What EU Roaming Changes Have EE’s Competitors Made?
To date, EE’s competitors have left their EU roaming positions unchanged, albeit with some tightening of fair use policies (FUP) governing how much domestic data can be used when roaming in the EU / EEA / CH.
- Three: FUP of 12GB from 1 July (was 20GB). New 12GB FUP aligns Go Roam in Europe benefit with Go Roam Around The World benefit.
- O2: FUP of 25GB from 2 August (previously no set data limit).
- Vodafone: Pre-existing FUP of 25GB remains unchanged.
Will Other Operators Follow EE?
We think this is likely, once EE has bedded down the charges and taken the initial negative media flak. O2 and Vodafone are unlikely to want to miss out on the incremental ARPU offered by changing EU roaming pricing. Three may seek marketing benefits from sticking with its long standing Go Roam proposition, given its lack of other competitive differentiators.
Once competitors follow EE down this path, opportunities exist to differentiate their roaming pricing from EE based on:
- Price: Differentials on price levels for e.g. daily and monthly charge pricing
- Durations: Offering options tailored to holiday durations e.g. one week; two weeks
- Destinations: Offering better value from more inclusive locations for a similar price or offering country groupings which are more closely segmented to the needs of their customer base
- Account bundling: Offering better value from allowing all subscriptions on a single family account to benefit from inclusive roaming for one payment per account
- Quality of Service: Offering better value from faster roaming speeds by having greater 4G or 5G roaming agreements in place with inclusive destination operators.
All UK operators need to find new opportunities to raise prices to fund the roll-out of wider 4G and faster 5G services. Inclusive EU roaming is a legacy regulatory burden from which operators are now released. Operators are now free to monetise roaming to reflect its valuable benefit to customers.