SIM Only plans: a threat to subsidized handset business model

British consumers tend to engage themselves longer with their operator. Ofcom, the british regulator found that 42% of new contracts were 24 months or longer. And according to GfK, 2 years contract have reached 58% of the sales compared with 6% in October 2008.
This trend is due to the new appetite for iPhone and smartphone in general. These devices are quite expensive and operators offer them for a symbolic price against a 12 month contract on a high end price plan or 24 month contract on middle tier contract.

On the other hand 20% of new contracts are now SIM only one. SIM only contracts don’t come with any device. These SIM only plans are very price competitive and without any engagement. You can stop the contract with month notice period. The user needs to use his previous device or buy one without subsidy.

So the British market seems bi-polarized with around 50% of the consumer ready to engage themselves for more than 2 years to get a high-end device for free and some 20% who are ready to pay the full price of a device. But when compare the prices it is obvious the consumer is paying the handset on a monthly basis and gets less minutes and texts. See pictures.

Vodafone UK SIM Only

Vodafone UK 24 month plans

Vodafone UK 24 month plans

Furthermore, at the European level, the EU commission wants to ban contracts longer than 2 years.

Is the market ready to stop this drugged business model of subsidized handsets ?

Would it transform operators into dumb pipe if they cannot push their services on the handset ?

Would it impact the device manufacturers in dropping the number of devices shipped ?

Such questions should be answered in 2010…

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One thought on “SIM Only plans: a threat to subsidized handset business model

  1. Pingback: Stopping mobile subisdies: playing with TNT « Mobiles and Butterflies

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