Adjustment of tariffs / packages / options due to the German VAT increase

12.06.2015  • Product & Innovation

Client:
German mobile network operator

Challenge:

On account of the increase of the value added tax from 16% to 19% all tariffs, packages, options and other fees had to be adjusted. As it was uncertain how the competitors would react to the VAT increase, different scenarios had to be taken into account during decision-making.

Core issues:

  • How should the future prices for new customers be structured?
  • Should a difference be made between existing customers and new customers?
  • Should a difference be made between business customers and private customers?
  • How could the VAT increase be compensated, at least in part, by raising the gross prices? Where is the largest revenue effect with a minimum of downsides (customer satisfaction, churn, etc.)?
  • How could decisions be secured as flexibly as possible against competitive actions (no shifting of VAT increase to the customer)?

Our input:

  • Elaboration of a “VAT strategy”. Evaluation whether the VAT increase is to be shifted to the customer, and if so, to which customers and in which way.
  • Elaboration of new tariff models for all tariffs, packages, options and other fees (post & pre-paid) for existing customers and new customers
  • Demand analysis and triggering of implementation
  • Drawing up business cases for calculating the revenue / DB impact including calculation of scenarios
  • Preparation of a basis for the management decision

Results:

  • Smoothing the impact of the VAT increase (prevention of loss in sales in the amount of around 180m Euros over the planning period)

Prevention of VAT-induced churn or negative gross add effects