Operators will become more experimental with tariffs next year to drive demand for smartphones, analysts have claimed.
This month, O2 launched a new leasing contract for the iPhone 4S (pictured) while T-Mobile introduced more short-term deals for businesses. Both contracts run for 12 months, with O2 understood to be the first UK operator to offer a lease for a device since the late 1980s.
Strategy Analytics’ analyst Phil Kendall said O2’s move into leasing was driven by increasing competition in the smartphone market since the network lost exclusivity on the iPhone in 2009. He said: ‘With its rivals now selling iPhones and other Android devices, O2 is just one of four or five brands pushing smartphones. It is looking for a new vehicle to maintain momentum.
‘The challenge for retailers over the coming year is how to push smartphones further with customers.They will want to increase ownership from around 35% now to something closer to 60%.’
O2 is offering customers 750 minutes, unlimited texts, insurance and 500MB of data for a 16GB device under its new scheme. It is also offering business tariffs starting from £45. O2 UK’s marketing and consumer director Sally Cowdry claimed the operator wanted to take consumer familiarity with leasing the likes of washing machines and televisions to deliver a similar proposition for mobile phones.
Kendall said that while the offer makes sense as there are people who prefer not to pay upfront for devices, £55 was too expensive. He said: ‘The model has legs but not at that price. It feels a little top heavy to me. It’s not difficult to do the maths on other ways of owning an iPhone.’
Meanwhile, T-Mobile launched its new 12 month business tariff last week. Customers can choose from HTC’s Desire S and Wildfire S or RIM’s BlackBerry Curve 9300 and Bold 9870 handsets. The lowest entry point tariff is £25 for 750 minutes, 250 texts and 100MB of data, with the highest tariff offering 2,000 minutes, 500 texts and 1GB of data for £45 per month.
Kendall said offers similar to those O2 and T-Mobile are currently promoting would become more commonplace as operators look to increase smartphone penetration.
He said: ‘We are going to see more UK operators experimenting with different ways of getting smartphones into customers’ hands in the next year.’
CCS Insight MD Shaun Collins said: ‘Tariffs will be one of the main battlegrounds for the UK next year. Retailers will be experimenting more with tariffs and we will see more deals like T-Mobile’s U-Fix, Tesco’s capped tariffs or Vodafone’s ‘try before you buy’ data offer. For mobile operators to sustain their balance sheets, they are going to have to reconstruct the tariffs that they offer.’