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Price war over 4G is heating up in Europe

Monday, 9 Dec 2013 | 5:19 AM ET
Marco Vacca | Photographer's Choice | Getty Images

The battle between telecoms firms to attract and retain customers is heating up with more offering the latest fourth generation (4G) service at no extra charge to consumers.

The price war intensified on Monday as France's third largest operator by subscribers, Bouygues Telecom, announced it would offer its customers its 4G service without a price hike -- just a week after rival French provider Iliad launched the service at a rock-bottom price.

The move will now add pressure on other telecoms companies operating in France -- Orange and Vivendi -- to follow suit and signals an increasingly competitive streak in the mobile telecoms sector where companies battling falling revenues move aggressively to distinguish themselves from rivals and lure customers.

The 4G service, with its faster high-speed mobile internet connection, has become a focal point for competitors and consumers alike according to one telecommunications expert.

Daniel Gleeson, a research analyst from IHS Global Insight, told CNBC that while there was money to be made in 4G, a lot of operators in Europe that had decided to charge extra to customers for the upgraded service were "going about it in the wrong manner."

"Charging extra prices for 4G might seem logical but it actually just turns consumers off it. Particularly in a very price-conscious region like Europe, charging extra money just doesn't make sense," he told CNBC Europe's "Squawk Box" on Monday.

He said that U.S. operators had adopted a more sensible and logical approach to launching their 4G networks.

(Read more: Europe is strangling the telecom industry: CEO)

"Instead of raising prices for 4G, operators there just relied on users using more data at those faster speeds to move up to higher data caps -- and using those to recoup their investment. I think that's a more logical and sensible and consumer-friendly way- it's easier for people to understand that rather than to charge more just because [the service] is a little bit faster."

His comments come as a report is published that could signal a reprieve for European telecoms operators as they struggle in an era of decreased revenues and increased regulatory pressure.

Citing sources "close to the process, plans to scrap roaming charges in the European Union (EU) by 2016 could be delayed by three years, according to a report in the U.K.'s Daily Telegraph newspaper this weekend.

The European Commission had wanted the measures to be passed into law before European elections next year but that was now looking highly unlikely, the paper reported. Telecoms companies operating in Europe had vehemently opposed the move, saying their already-squeezed profits would decline further.

(Read more: EU plans to end roaming fees to hit telcos from 2014)

IHS' Gleeson said a delay would be a "game-changer" but not to a "huge extent." "At the moment, a lot of operators are trying to get ahead of the game and cut some of their roaming charges to try to gain a competitive advantage in the short-term – [operator] 3 in the U.K. is the most obvious example if this as they've eliminated roaming charges across all of their own networks in Europe."

"I think you'll find that a lot of operators will [scrap charges] anyway in advance of any regulatory pressure or forced regulation change," Gleeson remarked.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

What are the 2014 smartphone trends?
Daniel Gleeson, mobile analyst at IHS, says next year will see "smartphone ubiquity" - smartphones in every country at every price point.

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