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Are Local Carriers Set To Raises Prices To Pay For 5G?

Serious questions are being asked as to whether Telstra Optus and Vodafone are set to follow UK networks with the raising of prices to pay for the roll out of extensive 5G networks in Australia and the demands that video streaming is putting on their networks.

In the UK phone companies are preparing to roll out their biggest price increases in years, some claim up to 10%, exacerbating a cost-of-living squeeze similar to what is happening in Australia.

The carriers Vodafone BT Group, Virgin Media O2, and Three UK are according to Bloomberg pressing ahead with plans to raise monthly charges that could be as high as 10%.

The big increase in phone costs will help the carriers recoup billions they have invested in upgrading networks to 5G and to cope with a surge in data usage.

Local carriers were also forced by the Federal Government to invest in expensive European network providers after Chinese Company Huawei was banned in Australia from being a supplier to networks.

In Australia, the Australian Competition & Consumer Commission who have been keeping a check on carrier pricing could be called in if it is seen that carriers are price gouging.

16 July 2019, North Rhine-Westphalia, Dusseldorf: A Vodafone employee holds a 5G smartphone in her hand. Vodafone is the first German telecommunications company to launch a commercial 5G network. Photo: Federico Gambarini/dpa

The move if it happens in Australia could also be a contributor to inflation.

In the UK inflation is already at its highest level in more than a decade and is becoming a focus for government officials claims Bloomberg.

Prime Minister Boris Johnson said in the UK Parliament overnight that “inflation is a serious risk — it is going up.” The Bank of England expects the inflation rate may climb past 6% this year, triple its target.

The scale of the increases coming from operators will feed inflation they claim.

“It is long overdue,” said analyst Karen Egan from Enders Analysis. “With expensive spectrum auctions, costs of 5G upgrades, the additional costs of the Huawei ban, and their own costs inflating, the mobile operators can’t afford to be that generous indefinitely.”

A price increase in Australia would also bolster the earnings of Telstra, Optus and TPG Vodafone claim observers.

The higher UK prices due in the coming months could spark a standoff with regulators, who are monitoring the impact of price pressures on consumers.

Spokespeople for all four UK companies said the hikes were necessary to pay for the cost of network investment.

Shareholders are bracing to see how customers cope with big increases. If they are too steep, defections could follow, analysts at HSBC led by Adam Fox-Rumley said in a note published last night.

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