The Market Is Not Realizing The Vast Impact Of EU Roaming Fee Announcement

by: Jeffrey Himelson


Data charges while roaming will be reduced 55% in the 28-country EU bloc.

Facebook is set to benefit the most from these changes.

Social media platforms are ever becoming a utility and bears calling them a fad are being muted.

The media has a substantial effect on markets throughout the world. Stories that are highlighted and widely disseminated can sway the market in one direction or another. Today, the market did not price in the implications of the news of the European Union (NYSEARCA:EU) reducing roaming fees. The official press release can be found here.

Early on Tuesday, the EU cut cellphone roaming charges across the region by as much as 55%. This change will mean that people with mobile contracts from European providers will be charged less to make calls, send text messages, and browse the internet within the 28-country bloc. Although international carriers such as AT&T (NYSE:T) Verizon (NYSE:VZ) will not be affected, local operators such as Vodafone (NASDAQ:VOD) and Deustche Telekom (OTCQX:DTEGF) will need to cap their prices.

The most significant decrease in charges will come to data. The new cap rate will reduce the rate to 20 cents per MB which is 55.5% lower than before. Sending text messages will be reduced by 25%, receiving a call will fall 28.5%, and sending a call will decline 21%. Roaming charges peaked in 2007 and the EU actions have subsequently dropped the cost 80-90% since. There is speculation that the EU will act further to eliminate roaming charges all together by the end of the year.

Source: EU Press Release

There are a number of implications that come along with this change. The largest beneficiary of this reduction will undoubtedly be Facebook (NASDAQ:FB). With Facebook and Instagram platforms set to gain more engagement from the change, the company should expect further revenue growth. The Forrestor Study recently released, showed the tremendous engagement Facebook and Instagram enjoyed. With the decline in the cost of checking and uploading to these social media platforms, engagement rates should increase further. The release even highlights a savings of 3.5 Euros if you were to upload one photo a day for a week.

The one potential negative for FB is with WhatsApp. Lowering the cost for calls and text messages may reduce the user growth rate of WhatsApp in Europe. However, it still provides a greatly reduced cost comparatively and users praise the interface with the platform so the negative effect will be mitigated.

Google (NASDAQ:GOOGL) (NASDAQ:GOOG) will also benefit through Youtube. Youtube is data intensive, as well, so users will be less wary of using the service while roaming. Twitter's (NYSE:TWTR) main platform will not see much of an improvement as the data required for the platform is much lower than with other platforms. The one positive for TWTR is that its Vine service could experience higher growth rates after the change.

Source: Forrestor Study

Mobile daily active user growth for Facebook has been prodigiously growing in the past few quarters. With this change, expect the growth rate to continue to accelerate. As of the last quarter, revenue through mobile comprised the majority of its revenue so this change will be hugely beneficial.

Source: Investor Presentation

Examples of the significant level of savings that an EU consumer will experience were outlined in the report. Many users roaming on vacation will face lower charges and will be able to upload their new photos while traveling.

Source: EU Press Release


Although media outlets have not given the story much attention, the changes set forth by the EU will have influential effects on several companies. Facebook is set to benefit the most from the alterations while Google and Twitter will see a boost as well. These social media outlets are not just a fad, but are developing into a utility as headwinds such as costs are being reduced.

Disclosure: The author is long FB. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. I also own FB LEAP Call Options.