Europe's 4G users face premium prices European operators are pinning hopes on the launch of high-speed 4G mobile services to reverse the long-term decline in revenues. However, analysts question whether they can convince consumers to pay extra in a fiercely competitive regional market. The partial launch of 4G services in Europe has so far yielded mixed results for operators in establishing a price premium over 3G, according to research by Citigroup for the Financial Times, with the next generation mobile broadband services sometimes simply bundled into existing higher tariff plans in several countries. Premium or no premium 4G around Europe Citigroup analysts found that an emerging model was one where 4G was included without charge for higher spending customers, with additional payments for the lower tariffs, but there was little overall consensus in approach. Large regional operators have promised long suffering shareholders that the next shift in mobile technology will be different from the decade of 3G, when the overspending on costly spectrum and slow network building yielded writedowns on investments rather than any clear returns. The launch around Europe in the next two years of 4G services is promised by executives to be different, with the arrival of high-speed mobile broadband expected to accelerate already obvious changes in how people use mobile phones. High-speed 4G will enable better provision of data to smartphones and tablets, facilitating internet services such as social media and gaming. Creating premium-priced platforms for these services is seen by telecoms executives as a timely offset to the decline in traditional businesses of voice and text. Simon Weeden, Citigroup analyst, says: "After years of navigating through a deflationary environment, the European mobile operators have the chance to recover some pricing power with the transition to 4G/LTE." According to a study by Ericsson this week, 4G - also known as LTE, long term evolution - services will be available to about 60 per cent of the world's population and subscriptions will exceed 1bn by 2018, driven by more capable devices and demand for data-intensive services such as video. However, there is no guarantee that customers will accept higher prices, or that the fierce level of competition across Europe will allow operators such advantage. While 4G has been able to command a premium in the US, the American market is very different given a handful of very large groups without the same sort of "maverick" price-setters in Europe already promising zero premium services such as Three in the UK. For example, Verizon 4G was available in more than 440 cities, covering nearly 80 per cent of the US population, according to analysts, at a point when smaller rivals had managed to cover just a third of the country. This underpins a premium pricing opportunity for Verizon, but analysts say this is more difficult to achieve in Europe where there are at least three and more often four national mobile operators as well as smaller rivals using networks on a wholesale basis. Indeed, this helps explain why the gap between average revenues per user has widened between Europe and the US, which had a two-year head start with 4G. US users are encouraged to take more expensive tariff mobile broadband plans, resulting in consistently increasing revenue per user. By comparison, Europe's mobile markets, which have been slow to launch the new technology in part because of slow spectrum release, have become commoditised as operators offer similar services differentiated mainly on price. Mr Weeden says that the US and Singapore examples are "difficult to replicate" given the tougher competitive environment across most of the European markets. However, mobile groups need to show shareholders results for the high costs involved in buying and building 4G networks - with Vodafone only this week saying its UK capital spending would be 50 per cent higher this year to cover these costs. The key, according to some analysts, could be in creating a differentiated 4G service to attract customers willing to pay extra for better coverage and quality of service. "We could see situations where network differentiation creates the opportunity for sustained premium pricing for players who have invested heavily against the ones financially constrained," says Mr Weeden. Gervais Pellissier, finance director at Orange, is confident that the group can raise prices on the back of a 4G launch. Mr Pellissier compares the telecoms market to the airline industry, where there is evidence of a disappearing "mid range" of carriers as the sector polarises into budget flights and first class travel. Orange, he indicates, will invest in the network to meet this premium market need. Vittorio Colao, chief executive of Vodafone, also uses an airline metaphor when talking about the costs and pricing of 4G. "New things should be priced to reflect the cost," says Mr Colao. If you build a plane, then you [expect customers to] pay for the cost of the plane. Vodafone is confident that the introduction of superfast mobile broadband services over 4G will be a turning point for prices that have consistently dropped over the past decade in the sector. Vodafone points to its business in Germany, where it has so far taken 4G to close to half the country at a €10 per month premium on the average revenue per user. Robin Bienenstock, analyst at Bernstein, questions whether such an inflationary pricing environment based on data will be sustained - she agrees that operators need to "create enough of a difference" in an otherwise commoditised market. But this, she says, could be a challenge given competition. EE, the largest British operator, used its first mover advantage to price 4G services at a premium to 3G, and is confident a premium can be maintained even against rival services. Olaf Swantee, chief executive, says that the group would keep ahead given investment in network quality and technology that allowed higher speeds. "When you can bring true network differentiation, then you can monetise it," he says. Simply offering a 4G service is unlikely to be enough, most analysts conclude. Operators need to show an additional point of difference to claim a premium. That is likely to mean even greater expense in investing in network quality, coverage promises or buying exclusive content or services that will attract new customers. And hopefully, later, that will also mean a return on the investment.