March 5, 2013 / 3:15 PM / 5 years ago

T-Mobile Austria bucks trend with price increases

VIENNA, March 5 (Reuters) - T-Mobile Austria raised its contract prices for new mobile customers in a move seized on by some analysts as a signal of market repair after the merger of two Austrian rivals.

The Deutsche Telekom subsidiary increased its starting prices by 15 percent to between 22.99 euros and 45.99 euros ($29.91 to $59.83) a month depending on usage, reversing a years-long trend in the hard-fought Austrian market.

T-Mobile cautioned on Tuesday that it might actually earn less per customer over a two-year contract because it is also offering free premium handsets for a limited period and including the Deezer music service free, instead of charging 8 euros.

Deutsche Bank raised its recommendation on rival Telekom Austria to “buy” from “hold” after a roadshow by the company, during which executives referred to the T-Mobile move.

Shares in Telekom Austria rose 5.4 percent to 5.60 euros by 1509 GMT, outperforming a 1.3 percent increase in the European telecoms sector.

“Although the key for market repair is Hutchison (Whampoa) ... T-Mobile’s move is heading in the right direction with higher than expected price increase,” Deutsche Bank analysts wrote in a note.

“We expect Telekom Austria’s main brand, A1, to follow as there is space to do it.”

JPMorgan upgraded its earnings forecasts for Telekom Austria, citing “further evidence that domestic market repair will happen”.

A Telekom Austria spokeswoman told Reuters that the company had not raised its headline prices for A1 contracts for at least five years, although it varied the content of the contracts from year to year.

Telekom Austria doubled prices for its no-frills brand, Bob, in January and told analysts on Monday that its rate of adding new Bob customers had halved since that move.

Hutchison Whampoa, Austria’s smallest mobile operator, bought second-smallest Orange Austria for 1.3 billion euros in January after a prolonged battle to persuade regulators that the takeover would not harm consumers.

Austria, with a population of only 8.4 million and now three mobile operators, has Europe’s second-lowest average revenue per mobile user behind Finland, at a little more than 20 euros a month, according to Credit Suisse.

Hutchison has a deal at 7 euros per month, including 1,000 minutes, 1,000 SMS text messages and unlimited internet usage for customers who already have a handset.

Espirito Santo analyst Andrew Hogley, who also attended Telekom Austria’s roadshow, was sceptical that T-Mobile’s move would have a big impact.

“The reality isn’t as positive, with higher subsidies and extras being rolled in ... my sense is that people are desperate for some good news,” he wrote in an email. ($1 = 0.7687 euros)

Reporting by Georgina Prodhan; Editing by David Goodman

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