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Mobile Network Providers - UK - January 2017

OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Market fluctuates slightly as pressure on prices continues to rise
Figure 1: Forecast value of retail mobile network connections in the UK, 2011-21
Figure 2: Forecast value of retail mobile network connections in the UK, 2011-21
Declining post-pay revenues threaten margins…
…but data-only connections and sponsored data offer opportunities
Figure 3: Average monthly revenue per subscription, by contract type, 2010-15
Data-only connections help sustain market volumes
Figure 4: Forecast volume of mobile network connections in the UK, 2011-21
Figure 5: Forecast volume of mobile network connections in the UK, 2011-21
The market should be well insulated from any Brexit-related fallout…
…but it could have a huge regulatory effect
Companies and brands
EE is the biggest operator in the market
Figure 6: Retail mobile subscription shares, by provider, Q4 2015
The consumer
The Big Four control majority share of the market
Figure 7: Consumers’ mobile network provider, October 2016
Inertia drives customer retention
Figure 8: Time with current provider on phone used the most, October 2016
Contracts with a phone still the most popular option
Figure 9: Connection type, October 2016
Contract costs are stable while PAYG spend increases
Figure 10: Monthly spend, by connection type, October 2016
Consumers are increasingly data-hungry
Figure 11: Factors that would encourage consumers to switch provider, October 2016
Operators dominate distribution
Figure 12: Place of purchase of SIM card from the Big Four, October 2016
What we think
ISSUES AND INSIGHTS
From “free” add-ons to mobile data flexibility
The facts
The implications
Are contracts with a phone at risk?
The facts
The implications
Will e-SIMs put an end to customers’ inertia?
The facts
The implications
Can family plans help quad-play operators to build a customer base?
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Revenue is stable, but pressure on prices continues to rise
Declining post-pay revenues threaten margins
Data-only connections help sustain market volumes
The potential impact of Brexit
Smartphone ownership approaches the 80% mark
MARKET SIZE, SEGMENTATION AND FORECAST
Market fluctuates slightly as pressure on prices continues to rise
Figure 13: Forecast value of retail mobile network connections in the UK, 2011-21
Figure 14: Forecast value of retail mobile network connections in the UK, 2011-21
Ofcom data reflects better consumer understanding of their data needs
Figure 15: Mobile retail revenue, by service (£ billions), 2010-15
Declining post-pay revenues threaten margins
Data-only connections bolstering overall revenues
Figure 16: Average monthly revenue per subscription, by contract type, 2010-15
Data-only connections help sustain market volumes
Figure 17: Forecast volume of mobile network connections in the UK, 2011-21
Figure 18: Forecast volume of mobile network connections in the UK, 2011-21
The potential impact of Brexit
Introduction
The market performed well during the 2008 recession
Smartphones have become a modern-day essential…
…but a slowdown could undermine subscription revenues
Figure 19: Alternative market scenarios for the post-Brexit mobile network providers market, at current prices, 2016-21
Figure 20: Detailed post-Brexit scenarios for the mobile network providers market, at current prices, 2016-21
Forecast methodology
MARKET DRIVERS
Smartphone ownership approaches the 80% mark
Figure 21: Personal ownership of smartphones, January 2013-December 2016
Ownership of other smart devices drives data-only connections
The connected home also offers scope for growth
5G could threaten fixed broadband
Short and live videos to accelerate growth of mobile viewing
Phone usage shifting from fixed line to mobile
Figure 22: Outgoing fixed and mobile voice call volumes, 2010-15
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
EE is the biggest operator in the market
Rising adspend reflects market competition
Quad-play offering grows more competitive
Operator billing gaining traction
Google’s Project Fi explores nationwide roaming
The disruptive potential of virtual operators
MARKET SHARE
EE is the biggest operator in the market
Figure 23: Retail mobile subscription shares, by provider, Q4 2015
ADVERTISING AND PROMOTION
Rising adspend reflects market competition
Figure 24: Total above-the-line, online display and direct mail advertising expenditure on mobile network services, by advertiser, December 2014-November 2015 and December 2015-November 2016
Media mix reflects efforts to maintain brand awareness
Figure 25: Total above-the-line, online display and direct mail advertising expenditure on mobile network services, by media type, December 2015-November 2016
Nielsen Ad Intel coverage
LAUNCH ACTIVITY AND INNOVATION
Quad-play offering grows more competitive
Virgin Media and BT are also making their pitch for quad-play customers
Operator billing gaining traction
Ofcom hopes Android users will help crowdsource coverage data
Google’s Project Fi explores nationwide roaming
BRAND RESEARCH
Brand map
Figure 26: Attitudes towards and usage of selected brands, December 2016
Key brand metrics
Figure 27: Key metrics for selected brands, December 2016
Brand attitudes: Mobile network providers struggle to instil loyalty
Figure 28: Attitudes, by brand, December 2016
Brand personality: Virgin Media challenges the Big Four with upbeat image
Figure 29: Brand personality – Macro image, December 2016
Three and Vodafone struggle to keep up
Figure 30: Brand personality – Micro image, December 2016
Brand analysis
O2’s traditional image might be holding it back
Figure 31: User profile of O2, December 2016
Virgin Media’s cutting-edge image lets it compete with the Big Four
Figure 32: User profile of Virgin Media, December 2016
Three’s value-for-money offering fails to combine with other positive attributes
Figure 33: User profile of Three, December 2016
EE has cool and exclusive image but struggles to build strong identity
Figure 34: User profile of EE, December 2016
Vodafone’s outdated brand image divides generations
Figure 35: User profile of Vodafone, December 2016
THE CONSUMER – WHAT YOU NEED TO KNOW
The Big Four control majority share of the market
Inertia drives customer retention
Contracts with a phone still the most popular option
Contract costs are stable while PAYG spend increases
Consumers are increasingly data-hungry
Operators dominate distribution
NETWORK OPERATOR
The Big Four dominate the market
Figure 36: Consumers’ mobile network provider, October 2016
Multiple SIMs help consumers get the best of both worlds
Figure 37: Consumers’ mobile network providers (nets), by repertoire of consumers’ mobile network providers, October 2016
TIME WITH CURRENT PROVIDER
The majority have been with their current provider for three or more years
Figure 38: Time with current provider on phone used the most, October 2016
Inertia drives customer retention…
Figure 39: Frequency with which consumers have looked into switching options since they are with their current provider, October 2016
…but contract users are more likely to switch
TYPE OF CONNECTION AND CONTRACT LENGTH
Contracts with a phone still the most popular option
Figure 40: Connection type, October 2016
Family plans have potential to build tomorrow’s customer base
Almost half of contract customers are locked for two years
Figure 41: Contract length, October 2016
Contracts will help mitigate post-EU vote price rises…
…but rival payment options could chip away at the market
CONNECTION COST
Contract costs are stable while PAYG spend increases
Figure 42: Monthly spend, by connection type, October 2016
Converting PAYG customers to contracts: family deals…
…flexibility…
…and value-added services
Figure 43: Factors that would encourage consumers to switch provider, by monthly pay-as-you-go and contract spend, October 2016
Enticing premium contract customers
Customer service pays at the upper end of the market
Upgrade programmes also appeal to high-value customers
INCENTIVES TO SWITCH PROVIDER
Mobile users more inclined to switch provider
Figure 44: Repertoire of factors that would encourage consumers to switch provider, December 2015 and October 2016
Consumers are increasingly data-hungry
Figure 45: Factors that would encourage consumers to switch provider, October 2016
Incentivising data allowances
Building retention through mobile data flexibility
Zero-rating to advance contextual marketing
The issue of net neutrality
The influence of hardware on the choice of service provider
CHANNELS OF ACQUISITION
Operators dominate distribution
Figure 46: Place of purchase of SIM card from the Big Four, October 2016
Mobile users prefer face-to-face interactions
Figure 47: Channel of purchase of current SIM, October 2016
Bricks-and-mortar locations key to compete in mobile market
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
Market size and forecast
Fan chart forecast
Value
Figure 48: Best- and worst-case forecast for the value of the UK’s mobile network providers market, 2016-21
Volume
Figure 49: Best- and worst-case forecast for the volume of UK’s mobile network providers market, 2016-21
Brand research
Brand map

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