4/30/2008 1:01:00 PM
Price of mobile phones is hit by weak pound
The strength of the Euro against the pound is causing problems for UK mobile companies trying to manage the price of handsets.
Sterling is down 20% on the Euro compared with 2007, and 80p is required to buy one Euro at the moment, compared with less than 70p for virtually all of last year.
It has made handsets around 20% more expensive than they would have been last year for product buyers from the likes of Carphone Warehouse and Phones 4u, as well as distributors such as 20:20 Mobile and Data Select.
It follows frustrations expressed by retailers that new phones are too expensive to excite consumers – especially compared with the price of discontinued stock bought last year.
One senior retail executive compared the new low-spec Samsung J700 with the much more feature-rich, high-end Samsung D900, which are both priced at £70.
‘There’s no way the J700 is a £70 phone. The D900 came out last year and the price that it was bought at now seems a lot cheaper,’ the source said.
Other examples are the new Sony Ericsson W380i and W350i. Both are low-spec phones and are currently priced at around £80 Ð the same as the older but more high-end Sony Ericsson K800i.
Meanwhile, UK management at the major manufacturers have been left frustrated by their inability to ‘price down’ last year’s top handsets, as the pound continues to slide against the Euro.
The trade price of handsets starts high at launch, and manufacturers gradually decrease the cost of ‘flagship handsets’ to maximise sales as they move from high-end contract to low-end contract, and then down to an affordable prepay price.
All the major manufacturers price handsets in Euros, partly to avoid grey-market trading in the EC.
One manufacturer said: ‘We can’t erode pricing for phones that came out last year because the drop we usually make on handset prices a year after launch isn’t as steep as how much the pound is weakening against the Euro.’
Nokia, which usually trims the price of its existing handsets every three months, has not cut any prices in recent quarters because of the strength of the Euro against the pound.
Another manufacturer pointed to the UK’s closeness to the slowing US economy: ‘The pound and the dollar are falling together – the pound-to-dollar rate is remaining relatively flat, but the Euro is staying strong.
‘It has also been difficult to forecast the pound because we can often get a good bearing from interest rates about the prospects of the pound. If they are higher in the UK and Europe, it means the pound is generally stronger.
‘Because the interest rates were collapsing in the US, we thought it would mean the UK is strong. But because of the credit crunch, it is affecting the UK as well.’