Youth, Young Adults and the Wireless Market - US - October 2003

SUMMARY

In the United States, mobile phones were once seen as being only for high-powered businesspeople and the very wealthy. Today, these services have become widespread geographically, the number of subscribers has increased, the number of wireless minutes used has skyrocketed, and prices have fallen to the point that wireless phones are available to most of the American population.

Currently, wireless penetration in the U.S. is between 40 and 50%. Penetration in the under 24 segment is only between 10 and 15%. This leaves tremendous room for growth, which will come from both the wireless industry and consumers themselves. The wireless industry has seen their revenues per subscriber plummet. As a result, the industry is devoting tremendous resources to attracting new consumers and to keeping existing ones.

The youth market and entertainment are now the key drivers in this quickly maturing industry. Wireless providers are trying to reach kids and young adults in their own space. They are aggressively marketing text services and games. Personalization options from services to faceplates and stickers abound. Cobranding is a new strategy exemplified by handset styling, service options and branded content.

This report answers questions such as:

• Which young consumers are paying their own wireless phone bills?
• In what ways have prepaid services affected the youth wireless market?
• How has entertainment become vital to the wireless industry?
• How are the major providers targeting young consumers?

In this report, the youth market is treated as a single group aged 12 to 24. In the consumer research section, we will discuss them in two subgroups, those aged 12 to 17 and those aged 18 to 24.

The wireless industry includes several services such as pagers and two-way radio, digital personal communications services (PCS) and fixed wireless services, with the bulk of the market being comprised of cellular and digital PCS. The primary focus of this report is cellular and digital PCS. For the purposes of this report, wireless phones are defined as any mobile phone providing voice or data services via cellular or digital services.

Excluded from this report are pagers, two-way radios, and fixed wireless services as well as WAP enabled devices that are not cellular telephone handsets (such as PDAs).

TABLE OF CONTENTS

Introduction & Abbreviations

INTRODUCTION

OTHER RELEVANT REPORTS

DEFINITIONS

• Other terms

ABBREVIATIONS

EXECUTIVE SUMMARY

A KEY MARKET

INCREASING IN NUMBER

HIGHER MONTHLY BILLS...

...SUPPLEMENTED BY PREPAID PLANS

COMMUNICATION VERSUS ENTERTAINMENT

WIRELESS INTERNET ACCESS

FINANCIAL CHALLENGES AND RESPONSIBILITY

MARKETING TO THE YOUTH DEMOGRAPHIC

YOUNG ADULTS AND CHURN

FUTURE GROWTH

MARKET background

WHY YOUTH?

• Social connectivity
• Entertainment
• Safety
• Mobility

POPULATION

• Figure 1 U.S. population, 1998-2008

COMPETITION LEADS TO COMMODITIZATION

• Figure 2 The commoditization of cell phone services, 1993-2002

THE YOUTH MARKET ONLINE

• Student usage reaches high levels
• Increasing time spent online
• Figure 3 Percent change in Internet traffic, by location, April 2002 versus April 2001
• Figure 4 Internet population estimates, October 2002

YOUTH AND BRANDING

teen/student spending & Income

TEEN SPENDING

• Figure 5 Total U.S. teen spending, at current and constant prices, 1997-2002
• What are teens spending money on?

THE COLLEGE AGE CONSUMER

• Figure 6 Total enrollment in all college institutions, 1998-2008
• Spending differences between on-campus and off-campus students
• Student employment (income earned)
• Figure 7 Annual earnings: full-time college students aged 18-24, June 2002-May 2003
• Non-earned income

FINANCES LIMIT MARKET

• New plans address financials

market trends

• The total mobile phones market
• Figure 8 Total U.S. retail sales of mobile phone handsets and subscriptions, at current and constant prices, 1998-2003
• Figure 9 Total U.S revenues reflecting U.S. commercially operated cellular, ESMR and PCS service, at current and constant prices, 1998-2003
• Chart 1 U.S. retail sales of mobile phone handsets and subscriptions, at current prices, 1998-2003
• Youth as a segment of the market
• Figure 10 Youth as a segment of the total wireless market, by age, 2002

MARKET SEGMENTATION

INTRODUCTION

INTERPERSONAL COMMUNICATIONS

• Voice
• Text messaging
• Figure 11 Interest and use of SMS services, 2001 and 2002

ENTERTAINMENT

• Gaming
• Ringtones
• Figure 12 Top downloaded ringtones for cell phone users, week ended June 3, 2003
• Internet access/information services
• Wireless photos

supplier profiles

INTRODUCTION

VERIZON [FREEUP]

• Replenishing airtime
• Marketing activities

BOOST MOBILE

• Entertainment is key
• Marketing activities
• Distribution

AT&T WIRELESS

• What is mLife?
• AT&T introduces prepaid wireless
• Current activities

VIRGIN MOBILE

• Marketing activities
• How are they doing?

Retail distribution

INTRODUCTION

WHERE CONSUMERS INDICATED THEY LAST PURCHASED THEIR PLANS

• Figure 13 Location for contracting most recent wireless plan, by age (18-24s vs. all adults), July 2003
• Chart 2 Location for contracting most recent wireless plan, by age, July 2003

THE STRUCTURE OF MOBILE PHONE DISTRIBUTION

• Service provider stores
• Figure 14 Top service provider retail outlets, by number of stores and kiosks, March 2003
• Chart 3 Top service provider retail outlets, by number of stores and kiosks, March 2003
• Electronics stores
• Figure 15 Top electronics retailers' operating data, latest financial year-end
• Other

ownership & Usage

INTRODUCTION

WIRELESS PHONE OWNERSHIP/USAGE

• Figure 16 Wireless device ownership/usage, June 2002-May 2003
• Figure 17 Wireless device ownership/usage, by age, June 2002-May 2003
• Chart 4 Wireless device ownership/usage, by age, June 2002-May 2003
• Figure 18 Wireless device ownership/usage, by gender, June 2002-May 2003
• Figure 19 Wireless device ownership/usage, by household income, June 2002-May 2003
• Figure 20 Wireless device ownership/usage, by region, June 2002-May 2003

FEATURES ON CELLULAR PHONE

• Figure 21 Features included on cellular phone, by age, June 2002-May 2003
• Chart 5 Features included on cellular phone, by age, June 2002-May 2003

DEVICES USED TO ACCESS INTERNET

• Figure 22 Devices used to access the Internet, June 2002-May 2003
• Figure 23 Devices used to access the Internet, by race/ethnicity, June 2002-May 2003
• Figure 24 Devices used to access the Internet (adults aged 18-24), by devices owned/used, June 2002-May 2003
• Figure 25 Devices used to access the Internet (teens aged 12-17), by devices owned/used, June 2002-May 2003

PURPOSES FOR WIRELESS PHONE USE

• Figure 26 Purposes for wireless phone use, August 2003
• Figure 27 Purposes for wireless phone use, by age, August 2003
• Figure 28 Purposes for wireless phone use, by gender, August 2003

SUMMARY

Payment & Plans

AMOUNT OF MONTHLY CELLULAR BILL

• Figure 29 Amount of monthly cellular bill, June 2002-May 2003
• Differences in respondents aged 18-24
• Figure 30 Amount of monthly cellular bill (adults aged 18-24), by region, June 2002-May 2003
• Figure 31 Amount of monthly cellular bill (adults aged 18-24), by race/ethnicity, June 2002-May 2003
• Figure 32 Amount of monthly cellular bill (adults aged 18-24), by county size, June 2002-May 2003
• Differences in respondents aged 12-17
• Figure 33 Amount of monthly cellular bill (teens aged 12-17), by age and gender, June 2002-May 2003

RESPONSIBILITY FOR PAYMENTS AND PROVIDER CHOICE

• Figure 34 Choosing service and paying bills, August 2003
• Figure 35 Choosing service and paying bills, by gender, August 2003
• Figure 36 Choosing service and paying bills, by age, August 2003
• Figure 37 Choosing service and paying bills, by household income, August 2003
• Prepaid wireless service providers
• Figure 38 Prepaid wireless service providers, August 2003
• Changing providers
• Figure 39 Willingness to switch providers, by age (18-24 vs. all adults), July 2003
• Figure 40 Factors prompting switch in wireless service provider, by age group (18-24s vs. all adults), July 2003

SUMMARY

The future

FUTURE TRENDS

• Local number portability
• Increased interest in existing applications
• New applications and software

CONCLUSIONS

APPENDIX: Trade Associations

APPENDIX: Research Methodology

CONSUMER RESEARCH

• Sampling & weighting
• Presentation & definition
• Further analysis

TRADE RESEARCH

• Informal trade research
• Formal trade research

DESK & INTERNET RESEARCH

SOURCES

DEFINITIONS

FORECASTS

APPENDIX:

MINTEL PUBLICATIONS

MINTEL SERVICES

• Product retrieval
• Retail audits
• Tailored research
• Global New Products Database

RESEARCH SUPPORT/CONSULTANCY/MIC

• The Mintel Information Centre (MiC)
• PR Research