Vodafone Hungary to increase prices: but there’s a twist

In Hungary, the telecommunications industry faces the challenge of adapting tariffs to address the increasing inflation. While it’s certain that there will be a price adjustment tied to inflation in the coming year, telecom companies are working to mitigate its impact on their customers. Vodafone Hungary was the first to take proactive steps in this regard.

Diverse approaches to inflation adjustment

As reported by HWSW, several major companies in the Hungarian telecom market have adopted varying strategies for handling inflation adjustments. Companies such as Telekom, Yettel and Digi base their adjustments on the average price index change from the previous calendar year. In contrast, Vodafone Hungary uses the average between 31 August and 1 September of the preceding calendar year, aligning with its financial year.

Vodafone’s adjustments

Vodafone has recently upgraded its services and is currently in discussions regarding adjustments. Under its current terms and conditions, Vodafone Hungary’s customers would have expected to face an inflation-linked tariff adjustment of over 22% in January of the following year. However, the new CEO, Tamás Bányai, has decided to postpone this adjustment until at least 1 March 2024, and reduce it to 15.4%. Moreover, Vodafone will increase individual discounts for this customer group by the same percentage. This will result in an annual discount of nearly 40% compared to the previously established inflation-linked tariff adjustment.

Competitive considerations

Vodafone Hungary’s decision appears to be motivated by competitive considerations rather than political factors. The company might have foreseen that its competitors would raise their tariffs by more than 50% in 2023 through a sliding tariff adjustment, potentially burdening customers further. Based on current contract conditions and inflation forecasts, rivals are likely to implement an additional 18-19% tariff adjustment next year. Consequently, Vodafone could achieve a more favourable overall correction index by approximately 8-9 percentage points compared to Telekom and Yettel, excluding discounts, over the first two years of tariff adjustments.

A new competitive landscape

In summary, the inflation-linked tariff adjustment is introducing a new dimension of competition among telecom companies in Hungary. Rivals are likely to respond by revising their contract terms, the extent of which will depend on how inflation affects the industry players. Analysts suggest that the telecom industry has been adjusting tariffs at an unjustifiably high rate compared to its cost increases, a trend exemplified by the robust financial performance of market leader Telekom, partially attributed to tariff adjustments.

Future outlook

Despite the challenges posed by rising inflation, it is anticipated that the adjustment will remain a prominent feature in the upcoming years. The rate at which the currency depreciates is slowing down, but its impact on both subscribers and operators is expected to be less severe than the current situation.

Source: HWSW