Setting the record straight
ROCE is an appropriate measure of the mobile industry's profitability. As ROCE represents operating profit after tax divided by capital invested, it is an important metric for capital-intensive companies, or firms that require large up front investments to start producing goods. ROCE should always be higher than the rate at which the company derives its capital from lenders and shareholders (WACC), otherwise shareholders will see the value of their investment decline the more the company invests.
The GSMA response to the consultation on the voice roaming regulation highlighted that the typical private customer, going on holiday once a year, saves around 5 euros versus pre-regulation prices. Regular business travellers will, of course, make greater savings.
As hundreds of millions of Europeans use roaming services, their total savings do add up to a substantial loss of revenues and profit to the mobile industry.
Some operators, depending on their geography and market position, have a larger roaming business than others (up to 20% of the total business in the most extreme cases) and they have been disproportionately hit by the retail and wholesale price caps introduced by the European Commission.
The GSMA response highlights the best tariffs which are available in the market today for those who use voice, SMS or data roaming and makes clear that these are highly competitive and well below the shock outlier levels cited by the European Commission and others.
Competition is the way to deliver benefits to customers and create a healthy industry making fair returns on its still substantial investments.
Biting the hand that feeds IT
