Price erosion and low customer loyalty put mobile operators in Lithuania, Latvia and Estonia under pressure

For two years in a row, leading operators in Sweden, Finland and Norway have been benchmarked against a local operator peer group through a practice led by tefficient. The results reinforce the rationale behind local benchmarking: In order to improve, operators need focused, fact-based and local input.

It’s time to give a similar tool to mobile operators in Lithuania, Latvia and Estonia.

The fixed telecom markets in Lithuania, Latvia and Estonia are very developed. Lithuania has Europe’s highest adoption of fiber-to-the-home. Estonia features a leading adoption of IP-based TV services. Wi-Fi use is widespread throughout the region. But in mobile, only price seems to matter: “Pay less, get more” is the market mantra.

The effect on the mobile revenue of operators is shown in three graphs – one per country [see the pdf version of the release].

With few exceptions, it is a very negative development. Even though most operators expand their customer bases, the graphs show that it doesn’t compensate for the price erosion.

What is making it yet more problematic is that lower revenue so far has been tightly coupled with lower profit: Increased cost efficiency has generally not compensated any of the revenue losses: Even as a percentage of revenue, profit margins have weakened.

Even though operators steer customers towards postpaid rather than prepaid offers, customer churn is still a major issue in all three markets: Several operators lost about 40% of their customer base in 2013.

To compensate, operators have to acquire new customers from competition, driving cost.

“We strongly feel something needs to be done”, says Allan Greve at tefficient. “Very little analysis focuses on the specifics of these three markets and we intend to change this.”

tefficient will therefore address the mobile operators in Lithuania, Latvia and Estonia with a benchmark focused on the situation and need of the operators in these competitive, highly comparable, markets.

The identities of participating operators will be confidential. Also in other aspects, the methodology established in Sweden, Finland and Norway will be followed.

Mobile operators in Lithuania, Latvia and Estonia can contact tefficient at info@tefficient.com for more information.

“The feedback from Sweden, Finland and Norway has been very positive both 2013 and 2014”, says Fredrik Jungermann at tefficient. “We’re happy to see our benchmark gaining further foothold in Lithuania, Latvia and Estonia.”