Author(s): Kester Mann
In the UK, more than one third of contract consumers (34 percent), will be on a SIM-only deal by the end of 2017, according to CCS Insight's latest operator forecast, published today.
This represents solid growth compared with 27 percent at the start of 2017 for a concept that's still relatively new for UK consumers still accustomed to buying a subsidised two-year handset deal.
Our report shows that SIM-only penetration will rise steadily over the coming years and will account for the majority (54 percent) of all consumer contracts by 2021. The main drivers of growth will be multiplay bundles of telecom services, family plans for mobile subscriptions, growth of second-hand device sales and a still largely lacklustre smartphone market.
This growth could accelerate further should handset manufacturers become more assertive in their positioning of direct-to-consumer instalment programmes. For example, Apple has the potential to scale up its low-key upgrade programme in a bid to capitalise on the strong affinity for iPhones among UK consumers. Samsung's scheme — launched ahead of Apple almost exactly a year ago — has also been largely "under the radar".
If the UK follows other markets, such as France and Spain, in offering heavily discounted converged offers, growth of SIM-only contracts will accelerate rapidly. Spain in particular has almost fully transitioned to the SIM-only approach, and Orange reports that 99 percent of consumer voice contracts were on such a deal in the last quarter of 2016.
Should providers seek to flood the market with low-cost or even free SIM cards, growth of SIM-only contracts will become significant. Indeed, TalkTalk has already dabbled in this approach, offering free SIM cards as part of a wider strategy to attract and retain broadband and TV customers. Meanwhile, Sky has the potential to more assertively exploit cross-selling opportunities; it estimates there are 23 million active monthly mobile subscriptions in Sky homes — a huge target market to pursue.
TalkTalk and Sky are just two of a host of mobile virtual network operators (MVNOs) looking to shake up the UK mobile market. CCS Insight continues to see good growth in the MVNO landscape in the UK, probably the most vibrant and competitive market in Europe. Virtual providers represented 14 percent of all mobile customers at the end of 2016 and will play an important role in taking total subscriptions toward 87 million by 2021.
Recent quarters have seen fresh thinking by MVNOs, which have been forced to innovate as mobile prices fall and suppliers make moves into multiplay. Examples of recent initiatives include Virgin Mobile's zero-rating of Facebook applications, iD's emergency 10GB "data cushion", an ad-based loyalty scheme from Tesco and a TV and video-on-demand service aimed at migrant communities from Lebara. CCS Insight recently published its detailed assessment of the MVNO landscape in the UK (see MVNOs Bring Innovation to Commoditised UK Mobile Market).
Our operator forecast provides a holistic review of hot topics in the UK mobile operator market and focusses on drivers of change. This qualitative analysis is followed by a detailed five-year forecast on all important operator metrics. More information on this service is available here.