British customers moving away from handset deals

Are Britons falling out of love with their handset deals? New data from GfK shows that the fastest growing mobile market in the UK is for contract SIM-only (SIMO) deals. Last quarter, the take-up of SIMO contracts rose by 20% from the previous quarter, and at 29% of the total mobile market, SIMO now represents the largest sector.

The figures are striking. Mobile phone companies shifted 900,000 additional units in this quarter with SIMO being responsible for half those deals. What has really boosted this sector of the market is that contract and PAYG customers are moving to it, all the while keeping its existing SIM-only customers. There’s also little evidence of a particular type of customers favoring a SIMO deal – they’re being deployed by heavy and light users alike.

The British experience mirrors that of the US. Customers there have also ditched the handset-based contracts and turned to SIMO deals. It has become customary for mobile suppliers to offer contracts and handsets separately: a trend that is set to become more commonplace on this side of the pond.

Imran Choudhary, Director of Technology at GfK, says, “SIM-only contracts are specifically designed to offer customers value for money. Once they switch to Contract SIMO, a sizable portion tend to remain with this type of contract for their next purchase. Even when consumers are ready to buy a new handset, many will buy a SIM-free device. This suggests customers are beginning to de-couple the handset purchase from the tariff purchase and choosing to buy both separately.”

Demand for more battery life

The bad news for handset vendors is that, not only are few people taking on new models – according to GfK, just 13% of mobile deals in the last quarter were for new handset contracts – but the snazzy new features being introduced are not proving much of an inducement. According to GfK, new features such as Face ID and animojs are not cutting the mustard with punters: what customers really like is longer battery life. When asked what they like about the new Apple, it’s this and wireless charging that stood out as key features.

GfK research suggests vendors have been looking in the wrong areas to improve their devices. All have made a big play about water resistant phones but, according to GfK research, this doesn’t feature in the top 10 reasons to buy a particular phone – price and battery life are seen as much more important.

With Black Friday deals and Christmas around the corner, there’s going to be some optimism for mobile phone vendors in the next quarter, but the long term prognosis is not so rosy, unless they can come to terms with consumers’ demand for more battery power.