* Denotes estimated figure; actual figure not disclosed
Figures may not add up to stated total because of rounding
Source: CCS Insight Market Landscape and Forecast: Telecom Operators, UK, 2020-2024
Unlike some other markets in Europe, like France and Italy, where disruptive new operators are upsetting the status quo, the UK mobile market has remained relatively stable in recent times, characterized by record-low churn. Challenger brands and MVNOs continue to fight fiercely at the entry level, but the UK has long moved on from a land-grab battle to build market share. Retention and upgrade are the leading focus points these days.
The sorry recent demise of Carphone Warehouse is a good example of the transition away from an acquisition-led approach. The third-party retailer has been caught in the crossfire of lengthening device replacement cycles and continued apathy on the UK’s high streets, forcing it to close all 531 standalone stores earlier in 2020 (see Instant Insight: Carphone Warehouse Closes Standalone UK Stores). The subsequent withdrawal of O2 and EE — to focus on selling to customers directly — could be the nail in the coffin of a much-loved UK brand.
Contract churn has remained low so far in 2020, partly because mobile phone stores closed during the Covid-19 lockdown. However, we expect to see a slight rise; in the near term, tough economic conditions will prompt some customers to shop around for a better deal, and Ofcom’s text-to-switch programme introduced in July 2019 has smoothed a traditionally cumbersome process to change network provider.
We also expect the pandemic to stir near-term growth in the prepaid market. This segment saw a sharp fall earlier in the year as people became confined to their homes, often connected to home broadband to access the Internet. As people evaluate their financial priorities in the aftermath of the crisis, prepaid services could see a temporary resurgence; refreshed offers from O2 and Vodafone appear focussed on this opportunity.
Apple’s recent announcement of 5G-enabled iPhones brings welcome opportunity for operators to push their 5G credentials (see Instant Insight: Apple Reveals 5G iPhone 12 Portfolio), so expect to see some major campaigns over the coming weeks. This, coupled with plummeting prices for 5G handsets from a range of manufacturers, is why we expect more than half of all mobile phones shipped in 2021 to be 5G-enabled.
Good growth of 5G, supported by rising availability of unlimited data plans, is likely to lead to strong growth in mobile data traffic in the coming years. We forecast average usage per customers to exceed 33GB per month in 2024.
Against the backdrop of the planned merger between O2 and Virgin Media, the gradual recovery from the pandemic, the hotly anticipated arrival of 5G-enabled iPhones and a greater emphasis by operators on bundled services, the UK mobile market is set for a lively few years ahead.
Written by: Kester Mann
Posted on 11/11/2020
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