Telecoms Retailing - UK - May 2007

ISSUES IN THE MARKET
Polarisation of usage
Retail segmentation
The role of the Internet
Complexity and transparency
Key themes
 DEFINITIONS
Telephone equipment
Mobile phone packages
Technology definitions
 ABBREVIATIONS
INSIGHTS AND OPPORTUNITIES
MARKET IN BRIEF
Historical trends
Channels of distribution
Market leaders
Figure 1: Where last mobile phone purchased, February 2007
Consumer behaviour
The future
FAST FORWARD TRENDS
Trend 1: Hire Hire
Trend 2: Death of the Middle
Trend 3: Transumer Express
INDUSTRY INSIGHT
Key Points
The market
Future growth
It is still a deal-driven market
The network operators
The new mobile phone consumer
The next generation mobile phone store
The multi-channel challenge
Fashion & technology
Convergence
The impact of convergence
EUROPEAN CONSUMER CONTEXT
Fixed-line telephones
Figure 2: Types of telephone owned – Germany, Spain, France and GB, 2006
Mobile phone ownership
Figure 3: Trends in ownership of mobile phones – Germany, Spain, France and GB, 2002-06
Mobile phone features
Features available
Figure 4: Have features – Germany, Spain, France and GB, 2006
Features used
Figure 5: Use features – Germany, Spain, France and GB, 2006
Percentage using features available
Figure 6: Percentage using features available – Germany, Spain, France and GB, 2006
INTERNAL MARKET ENVIRONMENT
Number of connections
Figure 7: Total telecommunications connections, 2001-05
Figure 8: Breakdown of telecommunications connections, by type, 2001-05
Rely on mobile only?
Figure 9: Main method of making and receiving calls among UK adults, 2004 and 2005
Fixed-line telephones
Figure 10: Types of telephone and fax machine owned, 2002-06
Mobile phone ownership
Figure 11: Trends in ownership of mobile phones, 2000-06
Multiple ownership of mobile phones
Figure 12: People in the household owning a mobile phone, 2002-06
Type of mobile phone contract
Figure 13: Type of mobile phone contract used, 2002-06
How long with current mobile network
Figure 14: How long with current mobile network, 2002-06
Rising ownership of mobiles among children
Figure 15: Youth ownership of mobile phones, 2005 and 2006
Figure 16: Youth, ownership of mobile phones, who pays and type of contract, 2005 and 2006
Mobile phone features
Features available
Figure 17: Have features, 2004-06
Features used
Figure 18: Features used, 2004-06
Percentage using features available
Figure 19: Percentage using features available, 2004-06
Commoditisation
The social role of mobiles
3G drives content?
Convergence
A highly competed market
Manufacturers moving in?
Health issues
Free calls/texts
Complexity
BROADER MARKET ENVIRONMENT
Population trends
Growing population
Figure 20: UK: Population trends, 2002-07
Immigration impact
But ageing too
Figure 21: UK: Population trends by age band, 2002-12
Household sizes getting smaller
Figure 22: UK: Percentage change of household size, 1996-2006
Population implications
Strong consumer confidence
Figure 23: PDI and consumer expenditure, at current and constant 2002 prices, 2002-12
But a more cautious consumer will emerge
Figure 24: PDI and consumer spend growth rates, at current and constant prices, 2002-07 and 2007-12
MARKET IN CONTEXT
Consumer spending
Figure 25: UK: Consumer spending on communications, 2002-06
Figure 26: UK: Consumer price index (selected goods) and share of communications of all consumer spending, 2002-06
Figure 27: UK: Average weekly expenditure on telecoms of households, 2003/04-2005/06
STRENGTHS AND WEAKNESSES IN THE MARKET
Strengths
Weaknesses
WHO’S INNOVATING?
Online services on mobile
Mobile TV
Recycling
Free services
Tariffs
Online innovation
Exclusivity
Own-label handsets
Simplicity
The manufacturers
Store formats
RETAIL SECTOR SALES AND FORECAST
Key points
Future
Past
Outlook
Figure 28: UK: Retailers’ sales, 2002-12
Figure 29: UK: Other specialist retailers’ sales as share of all retailers sales, 2002-12
Past trends
Figure 30: UK: Retail sales of telecommunications equipment, 2002-06
Figure 31: UK: Retail sales of mobile telephones, number of enterprises, 2001-05
MARKET SIZE AND FORECAST
Key points
The mobile phone market
Figure 32: Mobile phone subscribers 2001-05 and UK retail sales of handsets, by volume, 2002-06
Figure 33: Index of UK sales of mobile phone handsets, by volume and value (current prices), 2002-06
Figure 34: Market size and forecast for mobile phone handsets, at current and constant 2007 prices, 2002-12
Factors incorporated in the forecast
Figure 35: UK: Fixed line subscribers, 2001-05
Figure 36: Sales of fixed line telephones and answering machines, by volume and value, 2003-06
Figure 37: UK sales of telephones and answering machines, by type, volume and value, 2005
WHERE AND HOW THEY BUY MOBILE PHONES
 KEY FINDINGS
 WHERE PEOPLE BUY MOBILE PHONES
Orange retains pole position
CPW up and Vodafone down
Other winners and losers
Gifting is a big market
Figure 38: Outlet where last mobile phone purchased, January 2006 and February 2007
 WHO BUYS WHERE
Specialists
No pronounced gender bias
The young like T-Mobile, O2 and other specialists
Figure 39: Mobile phone specialists where last mobile phone purchased, by age, February 2007
Less affluent socio-economic bias at T-Mobile
Figure 40: Mobile phone specialists where last mobile phone purchased, by socio-economic group, February 2007
Figure 41: Mobile phone specialists where last mobile phone purchased, by gender, age and socio-economic group, February 2007
Pre-/no family lifestage is the most important
Figure 42: Mobile phone specialists where last mobile phone purchased, by lifestage, February 2007
O2 has a very clearly defined audience
Figure 43: Bought last mobile phone from O2, by special group, February 2007
Figure 44: Mobile phone specialist where last mobile phone purchased, by lifestage and Special Groups, February 2007
Non-specialists
Mobiles are a popular gift for women, teenagers and older people
Figure 45: Mobile phone received as a gift, by gender, age and socio-economic group, February 2007
Supermarkets have fairly broad appeal
Figure 46: Bought last mobile phone from supermarket, by gender, socio-economic group and lifestage, February 2007
But other retail outlets are biased to the young, families and urban prosperous
Figure 47: Bought last mobile phone from other retail outlet, by age, lifestage and ACORN category, February 2007
Who on earth doesn’t have a mobile?
Figure 48: Those that do not have a mobile phone, by age, socio-economic group and commercial TV viewing, February 2007
Figure 49: Non-specialists where last mobile phone purchased and those not having a mobile phone, by gender, age, lifestage, ACORN category and commercial TV viewing, February 2007
Channel used for last mobile phone purchased
Figure 50: Channel used for last mobile phone purchased, February 2007
 WHO BUYS FROM WHICH CHANNEL
Figure 51: Channel used for last mobile phone purchased, by age, February 2007
Figure 52: Channel used for last mobile phone purchased, by gender, age, lifestage and Special Groups, February 2007
Figure 53: Channel used for last mobile phone purchased, by socio-economic group and working status, February 2007
Figure 54: Channel used for last mobile phone purchased, by socio-economic group and working status, February 2007
Figure 55: Channel used for last mobile phone purchased, by outlet used, February 2007
WHERE AND HOW THEY BUY MOBILE PHONES – DETAILED CONSUMER DEMOGRAPHICS
Figure 56: Mobile phone specialist where last mobile phone purchased, by presence of children, working status, region, ACORN categories, technology usage, Internet usage, newspaper readership, commercial TV viewing and supermarket used, February 2007
Figure 57: Non-specialists where last mobile phone purchased and those not having a mobile phone, by presence of children, Special Groups, working status, region, technology usage, Internet usage, newspaper readership and supermarket used, February 2007
Figure 58: Channel used for last mobile phone purchased, by presence of children, region, ACORN categories, technology usage, Internet usage, newspaper readership and supermarket used, February 2007
FACTORS CLINCHING DECISION WHERE TO BUY
Key findings
 TOPLINE AND TREND DATA
Deals driven
Word of mouth opportunities
Customer loyalty
Stores competing well
Figure 59: Factors clinching decision about where to buy mobile phone, January 2006 and February 2007
 PRICE AND DEALS
Lack of interest among older people
Opportunity for M&S
Figure 60: Price and deal factors clinching decision about where to buy mobile phone, by gender, age, lifestage and supermarket used for groceries, February 2007
The overall package matters to the ABs
Cheap handsets are a driver for the less well off
Figure 61: Price and deals factors clinching decision about where to buy mobile phone, by socio-economic group, February 2007
 TRUST AND SERVICE
Women less confident shoppers in this market
Figure 62: Trust and service factors, by gender, February 2007
The young are motivated by good advice
Figure 63: Trust and service factors, by age, February 2007
The Es are influenced by store familiarity and ABs by good explanation of features
Figure 64: Trust and service factors by socio-economic group, February 2007
Iceland shoppers need help
Figure 65: Trust and service factors, by gender, age, socio-economic group and supermarket used for groceries, February 2007
 CHOICE OF NETWORK AND HANDSET
Getting the right network
How cool do I look with this?
Figure 66: Choice factors, by gender, age, socio-economic group and lifestage, February 2007
 HOW CLINCHING FACTORS VARY BY LAST STORE USED TO BUY MOBILE PHONE
Figure 67: Factors clinching decision about where to buy mobile phone, by outlet where last mobile phone purchased, February 2007
FACTORS CLINCHING DECISION WHERE TO BUY – DETAILED CONSUMER DEMOGRAPHICS
Figure 68: Factors clinching decision about where to buy mobile phone, by lifestage, presence of children, Special Groups, working status, region, ACORN categories, technology usage, Internet usage, newspaper readership, commercial TV viewing and supermarket used, February 2007
Figure 69: Factors clinching decision about where to buy mobile phone, by lifestage, presence of children, Special Groups, working status, region, ACORN categories, technology usage, Internet usage, newspaper readership, commercial TV viewing and supermarket used, February 2007
ATTITUDES TOWARDS MOBILE PHONES AND USAGE
Key findings
How mobiles are used
Figure 70: Attitudes towards mobile phones and usage, February 2007
What about the gadgets?
Figure 71: Attitudes towards mobile phones and usage, February 2007
Has anything changed?
Figure 72: Attitudes towards mobile phones and usage, January 2004, January 2006 and February 2007
The mobile connection
Battle of the sexes
Figure 73: Attitudes towards mobile phones and usage, by gender, February 2007
Age: social versus safe
Figure 74: Attitudes towards mobile phones and usage, by age, February 2007
Socio-economics: It’s a C thing
Figure 75: Attitudes towards mobile phones and usage, by socio-economic group, February 2007
ACORN: it’s not about money
Figure 76: Attitudes towards mobile phones and usage, by ACORN category, February 2007
Figure 77: Attitudes towards mobile phones and usage, by gender, age, socio-economic group and ACORN category, February 2007
What’s in a handset?
Features and age
Figure 78: Attitudes towards mobile phones and usage, by age, February 2007
C2 bling
Figure 79: Attitudes towards mobile phones and usage, by socio-economic group, February 2007
Figure 80: Attitudes towards mobile phones and usage, by gender, age and socio-economic group, February 2007
Can’t live without it?
Mobile teen spirit
Figure 81: Attitudes towards mobile phones and usage, February 2007
Figure 82: Attitudes towards mobile phones and usage, by socio-economic group, February 2007
Figure 83: Attitudes towards mobile phones and usage, by gender, age and socio-economic group, February 2007
Do the retailers stand apart?
Figure 84: Attitudes towards mobile phones and usage, by outlet where last mobile phone purchased, February 2007
Identifying targets
Figure 85: Consumer typologies for mobile phones, February 2007
Limited use (23%)
Who are the Limited use?
Only in emergencies (29%)
Everydays (48%)
Figure 86: Consumer typologies for mobile phones, by gender, age and socio-economic group, February 2007
What clinched the deal for the consumer types?
Figure 87: What clinched the decision about where to buy the mobile phone, by consumer types, February 2007
ATTITUDES TOWARDS MOBILE PHONES AND USAGE – DETAILED CONSUMER DEMOGRAPHICS
Figure 88: Attitudes towards mobile phones and usage, by lifestage, presence of children, Special Groups, working status, region, ACORN categories, technology usage, Internet usage, newspaper readership, commercial TV viewing and supermarket used, February 2007
Figure 89: Attitudes towards mobile phones and usage, by lifestage, presence of children, Special Groups, working status, region, ACORN categories, technology usage, Internet usage, newspaper readership, commercial TV viewing and supermarket used, February 2007
Figure 90: Attitudes towards mobile phones and usage, by lifestage, presence of children, Special Groups, working status, region, ACORN categories, technology usage, Internet usage, newspaper readership, commercial TV viewing and supermarket used, February 2007
Figure 91: Consumer typologies for mobile phones, by lifestage, presence of children, Special Groups, working status, region, ACORN categories, technology usage, Internet usage, newspaper readership, commercial TV viewing and supermarket used, February 2007
CHANNELS OF DISTRIBUTION
Fixed line equipment
Figure 92: Distribution of fixed line telecommunications equipment (phones, fax, answering machines), by channel, 2003-06(e)
Figure 93: Distribution of fixed line telecommunications equipment (phones, fax, answering machines), by channel, by value, 2003-06(e)
Mobile handsets
Figure 94: Distribution of mobile handset sales, by channel, 2000, 2002 and 2004-06(e)
Figure 95: Distribution of mobile handsets, by channel, by volume, 2000, 2002, 2004-06
RETAIL COMPETITOR ANALYSIS
Figure 96: UK: Leading telecommunications specialists, 2006
Channel used for last mobile phone purchased
Evaluation
Figure 97: Telecommunication specialists, evaluation, 2006/07
RETAIL ADVERTISING AND PROMOTION
UK advertising expenditure
Specialist mobile phone stores
Figure 98: Main media advertising spend, by leading specialist mobile phone stores, 2002-06
Figure 99: Share of main media advertising spend by leading specialist mobile phone stores by retailer, 2006
Figure 100: Share of main media advertising spend, by specialist mobile phone stores by media, 2006
Figure 101: Media advertising spend by leading specialist mobile phone stores by media, 2006
Non-specialists
Figure 102: Main media advertising spend, by leading non-specialist stores on advertising mobile phones, 2002-06
Figure 103: Main media advertising spend by leading non-specialist stores on advertising mobile phone, 2006
Figure 104: Media advertising spend by leading non-specialist stores on advertising mobile phone by media, 2006
Mobile phone manufacturers
Figure 105: Main media advertising spend by leading manufacturers on advertising mobile phones, 2002-06
Figure 106: Main media advertising spend, by leading manufacturers on advertising mobile phones, 2006
BRAND ELEMENTS
Figure 107: Attitudes to telecoms retailing brands, April 2007
 O2
Figure 108: Words associated with O2 brand, April 2007
Brand qualities
Save O2
 PHONES 4U
Figure 109: Words associated with Phones 4U brand, April 2007
Brand qualities
The right ideas – execute!
 VIRGIN MOBILE
Figure 110: Words associated with Virgin mobile brand, April 2007
Brand qualities
What’s stopping Virgin?
 ORANGE
Figure 111: Words associated with Orange brand, April 2007
Brand qualities
Is Orange all image?
 TESCO MOBILE
Figure 112: Words associated with Tesco Mobile brand, April 2007
Brand qualities
Tesco Mobile for technophobes?
 USAGE OF BRAND
Figure 113: Consumer usage of various telecoms retail brands, April 2007
 ATTITUDES TOWARDS BRANDS
O2 seen as perfect package?
Figure 114: Attitudes towards telecoms retail brands, April 2007
 BRAND SATISFACTION AND PERFORMANCE
O2 conquers, Orange divides
Figure 115: Customer rating of Telecoms retail brands, April 2007
 BRAND COMMITMENT
Likeability ≠ first choice?
Figure 116: Degree of customer commitment to Telecoms retail brands, April 2007
 ROUND UP
RETAILER PROFILES
3
Strategic evaluation
Background
Financial performance
Figure 117: 3: UK revenue split by type of customer, 2006
Store portfolio
Figure 118: 3: Interior
Retail offering
Market positioning
Brands
Product offer
Pricing
e-commerce & home shopping
Advertising
THE CARPHONE WAREHOUSE
Strategic evaluation
Network operators – friend or foe?
Diversification – a good move, but insignificant so far
Background
Financial performance
Figure 119: The Carphone Warehouse: Group turnover, 2001/02-2006/07
Figure 120: The Carphone Warehouse: Retail turnover, 2002/03-2006/07
Figure 121: The Carphone Warehouse: Distribution turnover, 2006
Figure 122: The Carphone Warehouse: Total group turnover by region, 2006
Store portfolio
Figure 123: The Carphone Warehouse: Interior
Figure 124: The Carphone Warehouse: Outlet data, 2002-07
Figure 125: The Carphone Warehouse: Outlet data, April 2007
Figure 126: The Carphone Warehouse: Store development, 2002-07
Retail offering
Market positioning
Product offer
Brands
Pricing
e-commerce & home shopping
Advertising
ORANGE UK
Strategic evaluation
Background
Orange quickly establishes itself in the market
Changes of ownership
Financial performance
Figure 127: Orange Retail Ltd: Group financial performance, 2001-05
Store portfolio
Figure 128: Orange Retail Ltd: Outlet data, 2001-05
Retail offering
Market positioning
Product offer
Operational issues
Advertising & marketing
e-commerce & home shopping
PHONES 4U
Strategic evaluation
See what you can do without O2
A young image
Reliant on network operators
Background
Financial performance
Figure 129: Phones 4U: Financial performance, 2001-06
Store portfolio
Figure 130: Phones 4U: Interior
Retail offering
Market positioning
Brands
Product offer
Pricing
e-commerce & home shopping
Advertising
TELEFONICA O2 EUROPE
Strategic evaluation
Background
O2 begins life as part of BT
European operations
Mobile Virtual Networks
Telefonica acquires O2
Financial performance
Figure 131: O2 Plc: Mobile telecommunications turnover, country breakdown, 2003-05
Figure 132: O2 Plc: Revenue split by segment & country, 2003-05
Figure 133: O2 (Retail): Group financial performance, 2002-05
Store portfolio
Figure 134: O2 (Retail): UK outlet data, 2002-06
Retail offering
Market positioning
Product offer
Operational issues
Advertising & marketing
e-commerce & home shopping
T-MOBILE UK
Strategic evaluation
Background
Financial performance
Figure 135: T-Mobile UK: Turnover, 2003-06
Store portfolio
Figure 136: T-Mobile UK: Store portfolio, 2002-06
Retail offering
Market positioning
Brands
Product offer
Pricing
e-commerce & home shopping
Advertising
VIRGIN MOBILE
Strategic evaluation
Background
Financial performance and store portfolio
Stores
VODAFONE GROUP
Strategic evaluation
Background
First mover advantage
Retail expansion
Mannesmann acquisition
Financial performance
Figure 137: Vodafone Distribution Limited (retail outlets): Group financial performance, 2001-05
Major European operations
The global and European context
Figure 138: Vodafone Plc: Selected financial data from major European markets, 2006
Figure 139: Vodafone Plc: Average monthly ARPU, 2006
Vodafone Italy
Vodafone Spain
Vodafone Germany
Store portfolio
Figure 140: Vodafone Distribution Limited (retail outlets): Outlet data, 2001-06
Vodafone Connectivity Centres
MVNO deal with Asda
Retail offering
Market positioning
Product offer
Operational issues
Advertising & marketing
e-commerce & home shopping