Planning for a New Smartphone

A Bewildering Array of Tariffs Makes Buying a New Phone a Tricky Decision

Buying a new smartphone has become a complex and difficult decision thanks to the vast choice of tariffs from a range of operators.

The UK’s mobile phone market has recently seen attractive promotions following the launches of new devices including the Samsung Galaxy S5, HTC One (M8) and Sony Xperia Z2. Samsung Galaxy SIII users are likely to make up a large proportion of people currently looking to upgrade; Sony and HTC will aim to gain many of these customers, but Samsung will be hoping the Galaxy experience can encourage SIII users to opt for the new S5.

The transfer prices (the prices at which manufacturers sell each device to the major operators) of these new products fall in the same bracket, meaning that competition will be based on the tariffs offered by the operators and retailers and on any bundled incentives.

In the UK, most of the post-pay tariffs for these new smartphones will be 4G contracts — 4G offers the most value for operators and a better overall experience for the consumer. Below is a snapshot of some key 4G contract deals for the new devices at their launch in the UK (online and on the high street), allowing us to compare the strategies of operators, manufacturers and retailers for marketing these smartphones.

 

 

The best value tariff depends on the quality of the package of minutes, texts and data associated with a free handset. Data is increasingly a deciding factor in a consumer’s choice of monthly smartphone contracts. Demand for 4G is growing rapidly, especially in the UK, and one of the key conclusions in our latest mobile phone forecast was that 4G will become the fastest adopted mobile technology ever (see LTE Phones to Account for over Half of Global Shipments in 2018). The premium for 4G is already declining, and operators are offering incentives with their post-pay 4G tariffs — Vodafone’s free Spotify and Sky Sports subscriptions, for example.

Bundling free gifts with smartphone purchases is also being used to make tariffs more enticing. Deals traditionally bundle free tablets, TVs or cashback with two-year contracts, but the introduction and growing popularity of wearables may change this. We expect companies such as Samsung to bundle wearable devices (like the Gear Fit or Gear smartwatches) free or at a discount with the latest smartphones. Bundling offers distribution opportunities for manufacturers and a point of differentiation for operators and retailers.

CCS Insight tracks prepay and post-pay high-street and online pricing to give our clients an understanding of the retail behaviour of consumers and sellers. Each month, we produce analysis of the mobile phone retail landscape, visiting flagship stores every week to record promotional activities and tariff pricing for the top 10 devices in the UK.

For more information please contact sales@ccsinsight.com