The economic downturn has seen consumers look to reduce the cost of their mobile phone outgoings. This has provoked a growing interest in SIM-only deals as subscribers move away from the traditional--and supposedly more expensive--pre-paid and post-paid tariffs. The search has also been driven by the growing acceptance of the longevity of handsets, concerns over the environmental impact of mobile phones, and by those unwilling to discard a handset, albeit a basic model, that they have become familiar with and refuse to abandon.
However, SIM-only is not a new phenomenon and is almost the standard mobile offering in emerging markets and those regions where pre-paid is dominant. This trend is spreading to developed markets where, according to research conducted by Ovum, SIM-only offerings are part of an evolving tariff environment that can be grouped into six different manifestations of mobile subscriptions: pay as you go; pre-paid hybrid; pre-paid bundles; post-paid SIM-only over 30 days; post-paid SIM-only over 12/18/24 months; and post-paid bundles.
However, Ovum warns that operators in developed markets must design their SIM-only offerings to work in their own market. In the UK, the latest trend is for SIM-only plans with a 30-day notice period. In the Netherlands post-paid SIM-only with 12-, 18- or 24-month contract terms have been common for many years, and similar post-paid offerings are now also growing in France.
But, crucially, mobile service providers need to adopt a "carrot and stick" approach to mitigate the churn risk. Operators should endeavour to woo their SIM-only customers, especially those on short-term contracts, in the hope of committing them to longer terms.
While this new-found belief in SIM-only deals is likely to annoy handset vendors, the key attributes of the scheme indicate that operators will not turn away from the advantages it provides them with. This shift seems set to provoke the larger cell phone suppliers to chase harder for mobile services revenue--thereby ensuring that the competitive friction between the operator and vendor community can only continue to rise. -Paul