French Telecom CEO Stephane Richard is feeling the squeeze of the eurozone’s unending troubles:
“We are in a period of changing consumer behavior,” Richard said this week during an interview at Bloomberg’s headquarters in New York. There are fewer shoppers in search of the latest and greatest gadget, and more of them are seeking lower prices on wireless service, he said.
The shift has been especially severe in Europe, where more customers are keeping the same phone when they switch carriers. Amid a slumping economy and mounting competition, France Telecom has seen prices drop 25 percent over the past three years, squeezing profit margins and its stock price. Its cheapest plan now provides unlimited calls and texting and 3 gigabytes of data for about 20 euros ($26) a month — about half the price of T- Mobile USA Inc.’s $50 plan, which is touted as a U.S. bargain.
We don’t know how many Galaxy smartphones Samsung sells, because the company refuses to break out their sales figures. But as their flagship, it must provide the bulk of the profits of its 140+ cellphone portfolio. Most of those phones are given-away-with-a-plan el-cheapo models without much margin. Apple has a little more wiggle room, since they introduce only one new model a year, then sell it for a premium. There’s some safety in not having to compete with your own low-margin feature phones.
But if European consumers are getting that price conscious, it could spell trouble for both companies’ bottom lines.