Costly Post Paid Mobile Services in UK...Is it?

Since the time I have come here in UK, I think I have heard and read so much about costly mobile services here in UK...Some of the rates are as high as 20p per minute for domestic calls which seem apallingly high...Obviously there are factors such as high labour rates which force the services to be costlier than services back in India ( or other developing nations), 20P a minute does not seem to be justifiable at all...Infrastructure costs, IT costs, operationals costs are all same anywhere in the world, then why mobile per minute costs are almost 20 times more than costs back in India...



I thought probably EBITDA margins for companies here are higher and I was not surprised when I saw that margins were more less in the same range...So does that mean these companies here are less efficient and are not quite adept at keeping costs down...First reaction was not possible and hence did a small analysis on the cost strucutre or incoming revenue (that is ARPU).. Tried to map out all the different costs which the operators have to take out from the monthly ARPU...Following is my analysis based on the current plan of £20.00 per month (ARPU) I have from O2...I got this plan 4 months back...Following are the services I have for £20.00 per month

- 18 Months Contract

- 600 Voice Minutes

- 1000 Texts

- Unlimited Web Browsing (Mobile Data)

- Free Paper Bill (Normally charged £1 extra)

- Sony C905 Phone (Retail price 4 months back was £350.00 - Assume cost price for O2 to be £200.00)



Following is my analysis and it might be very surprising for few to see what is the actual cost per minute for any subscriber in the contract...

Total Money paid by me in 18 Months - 20 * 18 = £360.00
Cost of Mobile for O2 - £200.00....
Money Left with O2 for providing services - 360-200= £160.00
For 1,000 texts every month, fixed costs of texts can be taken as £0.50
For 18 months, texts costs = £9.00
O2 charges £7.5 for web bolt on (mobile broadband)...Taking 80% gross profit on it, cost for O2 to provide mobile broadband - £1.5
For 18 months cost of mobile broadband is - 18 * 1.5 = £27....

Money left for providing voice services = 160-9-27 = £124 for 18 months
Money left every month to provide 600 minutes = 124/18 = £6.8
Cost per minute in pences = 6.8 *100/600 = 1.14 Pence = Rs. 0.86 = 86 paisa in Indian currency....

Do you still think, mobile phone calls are costly here....I know this probably is not the best way of calculating the actual costs but they do give an idea of actual costs for the users who are using full 600 minutes (One example is me)....

Any thoughts are welcome