2015 was not a year of groundbreaking change, with the market continuing to be squeezed as consolidation moved at a steady pace. However, 2016 is expected to be the year when things really start to happen.
Mobile spoke to senior figures across the industry who believe that 2016 will be the year the market begins to change, fuelled by an increase in data usage and an ‘explosion’ of the SIM-free market.
‘The market is tough’
In 2015, Vodafone spoke out about the difficulties of the market, claiming it did not generate enough cash in the UK to sufficiently invest in the market, relying on group funds to do so. According to Andy Coughlin, LG’s UK head of mobile, the issue of profitability is a cross-industry problem: ‘The market is tough, there is no denying that.
‘Some players are struggling to maintain profitability and have moved out of segments that they deem too competitive. What this does mean of course is that the high tier will get even more focus from some players, but can be very costly if they fail to break through.’
This is something that is echoed by plan.com founder and industry veteran Keith Curran, who predicts that breaking through in the market will become even more difficult in 2016 as Samsung and Apple continue their duopoly.
He explains: ‘With the likes of Apple and Samsung continuing to dominate market share, and the might of Microsoft determined to join them, you have to ask yourself, will 2016 see the demise of a number of other handset brands?’
Big mobile announcements in 2015 came from unexpected players, such as Google launching its US MVNO. O2’s Ronan Dunne predicts this trend of new services from new brands will continue in the coming year: ‘In 2016 we will find ourselves in a world where brands we never expected are selling us services and products we never would have imagined,’ he said. ‘We’re going to see TV from telecoms and SIMs from search engines, as Google looks to launch mobile in Europe.
‘Digital disruption will only intensify in 2016 – driven not just by new kids on the block but by the Goliaths grappling to keep pace. As a result, brands will have to fight harder than ever to win and keep customers. The only way to succeed will be to have a laser-like focus on your brand promise, giving consumers what they truly want and value.
‘We’ll see innovation around loyalty like never before as companies find new ways to reward customers who keep coming back for more. In that increasingly competitive market place, the only way to succeed is to keep delivering for your customers. That means keeping a focus on your brand promise.’
Window of opportunity
Brands will need to work even harder in 2016 to make money from mobile devices, Doro UK MD Chris
Millington tells Mobile. He believes that companies will have to move away from low margin devices and into new segments: ‘To succeed in 2016, established brands will need to adapt fast and consolidate their business.
‘This means stopping low cost, low-margin devices and learning new ways to develop some new niche positioning in order to be relevant beyond 2017. Risk needs to be reduced through a much stronger differentiation from entry devices players.’
However, manufacturer Kazam believes that this presents a good opportunity for brands to make their mark on the industry, taking advantage of the savvier shopper to claim back market share from bigger brands. Its CEO Michael Coombes tells Mobile that 2016 will give challenger brands a chance to shine and deliver ‘higher margins and better value’.
New levels of data
2015 saw an increase in data usage drive operator revenues and business strategies. EE expects this
trend to continue well into the new year, explaining that the demand for 4G will fuel investment in IoT and M2M.
Gerry McQuade, chief sales & marketing officer, Business at EE, said: ‘Businesses increasingly rely on 4G connectivity. Our business customers are investing in M2M, IoT, wearable devices, connected fleets and more, and seeing huge benefits. They’re rapidly moving beyond 4G connectivity as a productivity boost for the information worker, which will undoubtedly continue, and to connectivity as a tool for business transformation.’
LG predicts that the demand for more data will mean operators will have to work harder in 2016 to add value to their services. Coughlin says: ‘There are some great deals out there and the cost of data is falling as consumers become more data hungry, and I don’t see that changing any time soon.’ The growing popularity for media on the move is something plan.com’s Curran believes will also result in new mobile advertising revenues.
He said: ‘As tech and telecoms become one, data usage will rise to whole new levels as people’s appetite for media on the move continues, with mobile advertising revenue set to eclipse conventional methods some time in 2016.’
The SIM-free market has tripled over the past five years, according to Three, which describes this
growth as one that is driving the industry. Danny Dixon, director of customer strategy at the network admits that this will present greater challenges for operators in 2016, who will now need to work harder than ever to keep their customers.
‘There will be two key focus areas within customer experience: network and support,’ he says. ‘This drive across the mobile industry is being driven by a number of factors including the rise of the SIM-only market, which has tripled in size over the past five years, according to YouGov. As well as holding onto handsets for longer, consumers are more willing to source their own handset and search for a great SIM-only deal.
‘This trend, allied to the shorter contract lengths of SIM-only, means that operators have to work harder to retain their customers. Loyalty schemes will grow in popularity and more operators will look to replicate initiatives such as Three giving their customers access to OTT services such as Deezer for free.’
Mobile-savvy shoppers are now opting to keep their handsets for longer, choosing to be more flexible when it comes to monthly contracts, according to Kazam’s CEO. Coombes told Mobile: ‘People are becoming wiser to the true cost and value of phones, not to mention the lengthy contract periods. In a market that has been driven by monthly tariffs, consumers realise they have more flexibility and choice, if they opt for SIM only.’
The grapple for SIM-free market share saw John Lewis use 2015 to kick-start its mobile proposition by selling unlocked mobile handsets in-store. The high street brand describes SIM-free growth as ‘an explosion’, one that it claims it will continue to take advantage of well into 2016.
Suddy Bhardwaj, buyer for Mobile and Connected Services, told Mobile: ‘The SIM-free market has exploded in recent years as customers increasingly recognise the savings that come from buying a handset outright. We introduced mobile phones for the first time earlier this year, offering SIM-free handsets in store and online, and we’re also currently trialling contract handsets in two of our stores.’
IoT & wearables
The role of the consumer in shaping the industry over the next year is one which Fonehouse CEO
Clive Bayley believes can’t be underestimated as the wearables market continues to grow in 2016, claiming that mistakes ‘will be costly’.
‘2016 will see new formats springing up in wearables and IoT as the marketing product design departments try to find the way forward and answer the questions “what does the consumer really want?” and “how can we create the need?”. This will be a tough area to play in as mistakes will be costly.’
For IoT platform Jasper, success will lie in presenting businesses with use cases for IoT and how it can make life easier for the business and consumer. Macario Namie, VP Strategy, says: ‘In 2016 business-savvy enterprises will demand accuracy and accountability, resulting in clearer definitions from IoT solution providers.
‘Companies will need to articulate exactly what their IoT solution enables and clearly demonstrate how they make it easier for enterprises to launch, manage and monetise IoT.’
2015 was the year in which smartwatches burst onto the scene, followed closely by advances in developing the smart home. However, according to manufacturer Doro, the new year will see the demise of this technology, with its UK MD claiming ‘even Apple couldn’t make it work’.
‘Despite the growing trend and desire for wearables in 2015, I think the new year will see a demise in “unnecessary technology”, with many vendors already struggling to keep smartwatches viable in their business, says Chris Millington.
‘In Q2 Apple sold 3.6m smartwatches, against financial analysts’ estimated 40m of sales – and if Apple can’t make smartwatches work, you had better be careful if you try to imitate without a stronger proposition!’