August 2010
After a period of slowing sales in the mobile phone contracts sector, recent research from Ofcom suggests that mobile phone contract sales are starting to steadily increase and buck the general malaise in the UK retail sector as a whole.
GfK reported that June 2010 sales figures of mobile phone contracts were up 6.8% when compared with June 2009 and this caps a 3 consecutive month increase in sales – the first time this has happened since mid 2008.
Previously a focus on pre-pay pay as you go mobile phone offers provided a strong catalyst for the industry, but with the slowdown in PAYG uptake, the mobile phone industry began to decline. However, after a number of high profile advertising campaigns and phone hardware launches, the pay monthly mobile phone model is starting propel phone sales back to previous levels and beyond.
Purchases of the new iPhone 4 have significantly increased mobile phone contract sales, particularly in the 24 month contract sector. So much so that research released by Ofcom last week showed that 80% of all new pay monthly contracts were taken over a 24 month period.
An additional driver of the increase in mobile phone contract sales is the increased popularity of SIM only deals. These are mobile phone contracts where you only receive a SIM card which you place in an existing mobile phone. SIM only contracts have the flexibility of rolling 30 day contracts or alternatively users can be locked in for 12 or 24 months if required. The benefit of the SIM only deals are the flexibility of the contract term and the fact that the number of extras (free minutes, free Internet, or free texts) are greater than standard mobile phone contracts because the networks are not having to subsidise the cost of a handset because no handset is supplied with a SIM only contract.
SIM only contracts now make up approximately 1 in 5 of all mobile phone contracts taken out in the UK and are substantially eroding the market share of pay as you go offers.