Operators in price war with SIM-only offers

European mobile operators are becoming embroiled in a price war over SIM-only offers, with an increasing number using this tactic as central to their marketing plans to attract new customers.

This battle, which focuses on offering the lowest price for airtime minutes and texts, is proving to be a double-edged sword for operators. On the plus side, SIM-only deals remove the high costs associated with handset subsidies, but consumers purchasing these deals have significantly lower average spends--at least 50 per cent in many cases, resulting in lower margins for the operator. O2 in the UK said its contract ARPU was down 2.5 per cent year-on-year in Q3/08, thought to have been caused by an increase in SIM-only tariffs.

Orange said its SIM-only deals were proving extremely popular with customers, and the company expected to launch further marketing innovations in this space over the next few months. "Interest in SIM-only offers has grown significantly--largely due to the value they provide--and they are attractive to customers who are not 'handset driven' and can benefit from cheaper tariffs."

Vodafone is also thought to be experiencing an upsurge in SIM-only deals as the market polarises between these cut-price offers and subscribers wanting the latest high-end smartphones. O2 has admitted SIM-only deals make up over 20 per cent of all contract connections, and is also seeing a similar divide to Vodafone between customers migrating towards the low-end or high-end of the handset market.

Separately, T-Mobile International has agreed a deal with the SIM card vendor Gemalto to develop prototypes of rich media applications based on Smart Card Web Server Technology (SCWS) in the SIM card. The idea is for Gemalto to provide T-Mobile with its Multimedia Ready SIM card incorporating SCWS technology, which enables applications to run directly from the SIM.

For more on this story:
Mobile Today and Cellular News

Related stories:
Orange targets business users with SIM-only offer
T-Mobile goes aggressive--mimics winners' tactics
SIM marketing deal boosts O2 results
GSMA calls for full NFC functionality by mid-2009

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