Vodafone hikes overseas roaming costs 40 per cent

Chris Keall has the Vodafone overseas roaming story at the New Zealand Herald: Vodafone NZ increases global roaming cost from $5 to $7 a day. (The story is behind the pay wall).

A $2 price rise for overseas roaming doesn’t seem much until you realise it’s a 40 per cent price increase at a time when inflation is close to zero. Few other service providers could get away with a 40 per cent price hike.

That said, no-one can argue that New Zealand mobile phone margins are excessive.

Less than a beer

Nor could you argue that $7 a day for overseas roaming is not reasonable. If you can afford to travel overseas and you want to stay in touch, it costs less than a glass of beer. For many readers, it remains the best option and is far better than the bad old days of bill shock.

Vodafone’s first line of justification for the price rise borders on the ridiculous. Keall writes:

The spokeswoman said, “Vodafone launched Daily Roaming over five years ago and since then have made numerous improvements to the service, including expanding it from 23 destinations to now over 100. Included in the latest round of new destinations are Vietnam and Cambodia, which are hugely popular with Kiwis. Chris Keall, NZ Herald, June 4, 2019

Vodafone benefits

The fact that there are more destinations may benefit customers. It benefits Vodafone more.

By giving the company a lot more opportunities to bill that $7 a day charge, it means much more revenue. It also improves internal costs by spreading the costs of administering overseas roaming charges across many more sales.

Let’s put it another way: imagine if New World said it was charging more for milk because it was stocking it in more supermarkets.

Vodafone has a much better argument when it says mobile data use is now running at three times the rate when the roaming service was first introduced. However, the cost of delivering a gigabyte of mobile data has fallen over time.

There’s a bit of snark about Vodafone’s customers not having to buy bundles… that’s how roaming works with Spark. And talk about one fixed price across markets where the costs are different. Well yes, but again, keeping the price structure simple is also of benefit to Vodafone.

Overseas roaming is revenue

Whatever the public justification, the increase is also about increasing revenue at a time when there’s little obvious growth. It’s also about improving margins. Both of these are fair enough, Vodafone is not a charity, yet for some reason, the company doesn’t feel able to say so.

The bigger concern for Vodafone customers could be that this is not the only price increase. Six months ago Vodafone jacked up broadband prices. There could be more in the pipeline.

Vodafone can’t go too far. As the Commerce Commission points out, New Zealand’s telecommunications market is competitive. If you don’t like Vodafone’s roaming price increases you can go elsewhere. The international equivalent of buying a prepaid Sim card in the first dairy as you leave the airport is also still an option.