Mobile Phones and Network Providers - UK - October 2007

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