3/5/2008 12:04:00 PM
The Sim-only magic trick
Now that the Big Four networks have all posted their results, it’s worth taking a minute to reflect on a financial year where the industry has had to work harder than ever to show growth. The industry seemed utterly paralysed 12 months ago. Here at Mobile, we started taking the gloom seriously when even the most upbeat executive in our contact book was shaking his head and muttering ‘terrible’.
Customers locked on long contracts, and no compelling handsets was the diagnosis. Since then, the operators have started to get creative as they look to ratchet up their customer numbers. O2 had a fantastic final quarter, and it was arguably the most imaginative with how it achieved those numbers. The operator tried to hold back its acquisition budget by heavily promoting low cost Sim-only deals. So the 276,000 contracts it added over Christmas are likely to have a strong weighting towards comparatively low-value spenders with no fixed commitment, but also some high-spending iPhone customers.
Other networks have also tried to prop up their contract base with Sim-only customers, after seeing what O2 did in the market. GfK data shows that the value of these Sim-only deals was largely between £10 and £20, and made up 10% of the market. In fact, there were 39,000 Sim-only deals sold in stores in the first week of December. And with mobile phones losing the lustre in the Christmas market, Orange started tempting consumers with unlimited texts and then bundling highly sought-after Nintendo Wiis and Sony PSPs. But the most recent development is the USB dongle phenomenon. The 60,000-per-month rate is exciting stuff and has kept the numbers ticking.
But it must be worrying for manufacturers to see operators signing up consumers on Sim-only deals by encouraging them to keep their old handsets. The attention towards USB dongles must also cause some concern.