Handset Makers May Suffer As Users Opt For SIM-Only Deals

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

Mobile owners are showing a tendency to hold onto their handsets for longer and opt for SIM-only tariffs, spelling pain for handset makers, a comparison website has warned

A comparison website has warned that the growing trend of users opting to hold onto their handsets and take out SIM-only deals, could mean that handset manufacturers will lose out in 2010.

The site, www.simonlyoffers.com, said that it is preparing itself for an upsurge in sales for SIM-only contracts in 2010 as more consumers choose to hold onto their existing handsets, which can often save up to two thirds on the cost of their mobile phone tariffs.

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“The growing demand for SIM only deals, which generally offer shorter contract periods as well as significantly cheaper tariffs, will undoubtedly threaten the production of mobile phone handsets in the future,” it said. It added that this would not be good news for mobile phone manufacturers, and cited data from ABI Research, which showed that during 2009, handset makers had to contend with a sharp drop in the shipping of mobile phone handsets, despite the rising popularity of smartphone technology.

In late October a report from Strategy Analytics said that there had been an average decline of 11 percent in the first, second and third quarters of last year, but it predicted a recovery during the fourth quarter of 2009.

“In 2009 we saw an increase in SIM-only sales every month other than December, when consumers are more likely to opt for a deal with a new handset as they are shopping for gifts,” said Richard Patterson, marketing director for SIM Only Offers. “It seems that, although the majority of consumers are still in the dark about the saving that can be made with a SIM only contract, awareness is most certainly growing.”

Patterson added that mobile phone providers have been quick to invest advertising budget into this growing revenue stream, with all five of the major networks and numerous retailers competing for market share.

The users’ shift towards SIM-only deals comes as new research from ABI Research, predicted that as 4G network deployments gather momentum, a substantial 22 percent of device subscription revenues will come from suites of operator-branded premium services.

In its new study entitled “4G Mobile Consumer Services”, it said that total 4G mobile consumer service revenue – including mobile Internet services – will grow rapidly to exceed $70 billion (£43bn) worldwide in 2014.

“Operators of 4G networks will refuse to be marginalised as ‘dumb data pipe’ service providers,” said ABI Research practice director Philip Solis. “Instead, they will offer suites of ‘smart services’ – some internally developed, others via partnerships with third party suppliers – that will be provided over ‘smart networks’ enabled with all-IP technologies, IMS infrastructure and cloud-based storage.”