Sim-only takes off as handset market sees year-on-year decline

Sim-only takes off as handset market sees year-on-year decline

The Sim-only market is expecting a boost again in 2014 as innovations between smartphone generations get smaller and consumers become increasingly thrifty.

GfK figures for February 2014 were released last week to reveal a 10% year-on-year decline in the smartphone/mobile handset market, although Sim-only plans thrived towards the end of 2013. Senior account manager of telecoms and consumer choices, Dave Nelmes (pictured, above left), told Mobile that it’s a trend that seems likely to continue into 2014.

He said: ‘We are seeing very positive growth within the contract Sim market. This saw huge growth in Q4 2013 and has continued into this year. Consumers appear to be much more price aware and with the increased number of second generation smartphone users re-entering the market, they are happy to move to a contract Sim deal and save money.’

CEO of CCS Insight, Shaun Collins (pictured, above centre), added that the Sim-only market ‘could be at 35%’ by the end of the year, and already counts for about a quarter of the overall UK market. He said that ‘sophisticated buyers’ combined with a lack of new innovation in devices led to a ‘natural move’ to Sim-only.

Ben Wood (pictured, above right), also of CCS, told Mobile: ‘People are holding onto their phones longer. Phones have a longer life, for example, the iPhone has regular software updates to keep it fresh. So when a customer gets to the end of their contract Sim-only deals are attractive if they still have a functional handset.

‘New phones have gone from revolutionary to evolutionary. Customers who have an existing iPhone, Samsung or HTC will have a handset that is comparable to new devices coming out, so the step-change isn’t what it was two or three years ago.’

However, the handset market can return to growth again according to Nelmes, adding that a number of people could ‘potentially re-enter’ the contract market like customers due for an upgrade. A number of exciting models are hitting the market over the next few months like the HTC One (M8), Samsung Galaxy S5, Sony Z2 and a new iPhone, and Wood said the more savvy consumers will be holding out for one of those devices, explaining the Q1 dip.

Despite a plethora of devices going on sale in the UK over the next few months, both Nelmes and Collins agreed that operators and retailers needed to be more creative to stimulate growth while handset sales decline.

Nelmes said: ‘Operators, manufacturers and retailers are having to come up with new initiatives and markets to combat the decline in handsets and revenues. Operators are focusing on 4G propositions, and this is not through just handsets but is also through tablets and Mifi devices. Wearable tech is another avenue that will be pushed by the manufacturers as additional technology surrounding the consumer’s existing smartphone will be a key way to stimulate growth.’

Although the GfK figures reveal that pay as you go growth suffered a 25% year-on-year decline, CCS’s Collins thinks prepay could be a way to differentiate.

He said: ‘Operators should be thinking about refreshing pay as you go and put a renewed focus into it. We have seen in recent times that EE is launching its own 4G smartphone for £99 and I think we may see more of that.’

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