Mobile Phones and Network Providers - UK - October 2007

SUMMARY

Abstract

One of the more dynamic consumer markets, with considerable development since 2005: mobile broadband (or 3.5G) is finally becoming a reality, while at the same time features offered by handsets have expanded. In terms of networks, the increasing amount of MVNOs has continued to make the market highly competitive.

Mintel defines the mobile phones market as handset manufacturers and network service providers. The report covers mobile phones purchased by consumers and used for domestic and/or business use. Mobile phones (sometimes referred to as cellular phones) are defined as phones that are fully portable and do not rely on a connection to any base unit, instead relying on signals from mobile phone masts of the mobile phone networks operating in the UK.

There are two main types of mobile phone package offered in the UK at present. These are:

• Standard contract or post-pay subscription packages - the customer pays a monthly line rental, with payment usually made via direct debit. Users therefore need to have a bank/building society account and, generally, a good credit rating profile to be accepted onto such packages. Most are also based on a minimum term of 12 months, although one network provider is offering six months. Handsets are usually subsidised by the network provider for new customers and hence tend to be comparatively inexpensive, or even

  TABLE OF CONTENTS

  Table of Contents

  • Issues in the Market
  • Key themes
  • Definition
  • Market in Brief
  • Increasingly saturated market
  • Consumers want value
  • Technology moves on
  • Competition increasing for all
  • Many consumers remain conservative towards manufacturer and operator efforts to drive the market
  • Internal Market Environment
  • Key points
  • We're all mobile these days
    • Figure 1: Mobile phone ownership, 2003-07
    • Figure 2: Outbound call minutes, by fixed and mobile line, 2002-06
  • Mass ownership brings troubling consequences for networks
    • Figure 3: Who pays mobile phone bill, 2005 and 2007
  • Are networks really suffering?
    • Figure 4: Real cost of mobile voice and SMS per month(1), 2002-06
    • Figure 5: Average monthly expenditure, by fixed and pay-as-you-go, 2003-07
  • But a mature market does present networks with challenges
  • Triple play
    • Figure 6: Summary of multi-service operators offering mobile and other services, 2007
  • Increasing network loyalty
  • Networks want to focus on handset manufacturing
  • Established handset makers are moving into new markets, too
  • Competitive Context
  • Key points
  • Social networking
  • Fashion handsets
  • Advertiser-funded networks
  • Fixed line
  • The lure of the iPod
  • Strengths and Weaknesses in the Market
  • Strengths
  • Weaknesses
  • Market Size
  • Key points
  • Mobile subscriber numbers continue to rise...
    • Figure 7: Mobile phone subscribers, 2002-07
  • ...boosting mobile revenues
    • Figure 8: Total mobile phone revenues, 2002-07
  • Handset sales also record strong growth
    • Figure 9: UK retail sales of mobile phone handsets (including contract), by volume and value, 2002-07
  • Market Value Forecasts
  • We predict the development in the mobile market on basis of the following assumptions:
    • Figure 10: Monthly fixed contracts, average annual % change, 2003-07
  • Consumer groups used in analysis
    • Figure 11: Monthly fixed contracts, average annual % change, 2003-07 applied to consumer groups
  • Average annual expenditure of consumer groups
    • Figure 12: Number of subscribers within consumer groups, average monthly expenditure, 2007
  • Three scenarios
  • Static scenario
    • Figure 12: Static scenario -- forecast of subscribers, value sales and monthly expenditure by consumer groups, 2007-11
    • Figure 13: Static scenario, Past market's growth rates per annum and forecast value sales
  • Stable scenario
    • Figure 14: Stable scenario -- forecast of subscribers, value sales and monthly expenditure by consumer groups, 2007-11
    • Figure 15: Stable scenario, past market's growth rates per annum and forecast value sales
  • Growth scenario
    • Figure 16: Growth scenario -- forecast of subscribers, value sales and monthly expenditure by consumer groups, 2007-11
    • Figure 17: Growth scenario, Past market's growth rates per annum and forecast value sales
  • Market Segmentation
  • Key points
  • Prepay remains main market for new handset sales...
    • Figure 18: UK retail sales of mobile phones, by volume and type of package, 2004-06
  • Contract is increasing its share of the subscriber market...
    • Figure 19: Total network subscribers, by type of agreement, 2004-06
  • As is the profile of the MVNO sector...
    • Figure 20: Total network subscribers, by type of operator, 2004-06
  • 3G sector begins to show growth
    • Figure 21: Total network subscribers, 3G v other, 2004-06
  • Market Share
  • Key points
  • Handset market
  • Sony Ericsson outperforms all others
    • Figure 22: Estimated mobile phone handset brand share, by volume, 2002-06
  • Major brands win out against new upstarts
  • Operator market
    • Fragmented market with O2 and MVNOs gaining share
    • Figure 23: Total network subscribers, by network operators, 2002-06
  • Shift between prepay and contract presents a more complicated picture
    • Figure 24: Mobile phone subscribers, by network operator and payment type, 2004 and 2006
  • MVNOs -- what future do they have in the market?
  • 3G -- 3 facing increased competition
    • Figure 25: Estimated share of 3G subscriptions, 2004 and 2006
  • Companies and Products
  • Handset manufacturers
  • LG
  • Motorola
  • Nokia
  • Samsung
  • Sony Ericsson
  • Network Operators
  • 3
  • O2
  • Orange
  • T-Mobile
  • MVNOs
  • Tesco Mobile
  • Virgin Mobile
  • Brand Communication and Promotion
  • Key points
  • Network expenditure rises while investment on handsets stalls
    • Figure 42: Main monitored media advertising expenditure on mobile phone handsets and advertising as a percentage of sales, 2002-07
    • Figure 43: Main monitored media advertising expenditure on mobile phone networks and advertising as a percentage of sales, 2002-07
  • Investment by manufacturers is concentrated in the hands of a few companies
    • Figure 44: Total main monitored media advertising expenditure on handsets, by manufacturer/other company, 2004 and 2006
  • Big four invest in their fight for market share
    • Figure 45: Total main monitored media advertising expenditure on networks, by operator/other company, 2004 and 2006
  • Use of low-cost mass media is popular with handset manufacturers...
    • Figure 46: Main monitored media advertising spend on mobile downloads, by channel, 2003-07
  • ...with television remaining popular with network operators
    • Figure 47: Main monitored media advertising spend on mobile downloads, by channel, 2003-07
  • Advertising strategies
  • Operators -- looking to maximise opportunities in a crowded market
  • Manufacturers -- heavily focused on the promotion of specific models
  • Channels to Market
  • Key points
  • Independents lose out as new channels strengthen share
    • Figure 48: Retail volume sales of mobile phone handsets, by outlet type, 2002-06
  • Support and integrated approach vital
  • Network operators tighten grip on specialist sector of the market
    • Figure 49: Principal specialist retailers of mobile phones, by number of outlets, 2002-06
  • Consumer -- Purchasing
  • Key points
  • Traditional retail outlets remain main purchase channel
    • Figure 50: How last mobile phone was purchased/upgraded, 2007
  • MP3/Radio proving popular as a feature
    • Figure 51: Which of the following mobile phones do intend to buy or currently own?, June 2007
  • Consumer -- Mobile Handset Usage
  • Key points
  • Text services and camera features proving most popular
    • Figure 52: Features have and features used on mobile phones, 2007
  • Basic phone functions are the most used every day
    • Figure 53: Which of the following do you do with your mobile phone? And how often do you do it? June 2007
  • The Consumer -- Mobile Network Decision-making and Usage
  • Key points
  • Price, price and price again
    • Figure 54: Important factors when choosing mobile phone network, 2007
  • Healthy network market exists although some operators perform better than others in customer retention
    • Figure 55: Please indicate your service provider and plan type. Please can you also indicate if you have ever been with another service provider and switched, June 2007
  • Appendix
  • Consumer research
  • ACORN
  • Advertising data
  • Abbreviations
  • Consumer -- Additional Data
    • Figure 57: Features have and features used on mobile phones, 2003-07
    • Figure 58: Important factors when choosing mobile phone network, 2003-07
  • Attitude cluster analysis
    • Figure 59: Consumer typologies, by gender, age, region, socio-economic group, household income, media usage, presence of children, supermarket usage and TV reception, June 2007
  • Attitude clusters and cross-tabs
    • Figure 60: Consumer typologies, by attitudes towards mobile phones, June 2007
    • Figure 61: Consumer typologies, by interest in features, June 2007
    • Figure 62: Consumer typologies, by network operator and target group, June 2007
    • Figure 63: Consumer typologies, by interest in features and number of features used, June 2007
    • Figure 64: Monthly fixed contracts, average annual % change, 2003-07
    • Figure 65: Numbers of features on a mobile handset used
    • Figure 66: Breakdown of payg and fixed contract mobile users, 2007