Touchscreen handsets driving decline in UK spending
Touchscreen handsets are driving a decline in the value of the UK’s mobile market, according to research released this week. A new generation of non smartphone touchscreen mobile phones have brought about a significant drop in the value generated from UK bills, according to research from TNS ComTech, with users of non-touchscreen handsets spending 12 per cent less per month than they were last year, while the comparable decrease amongst users of non-smart touchscreen handsets is almost double at 23 per cent.
Since the launch of the original iPhone in 2007, touchscreen technology has taken the mobile market by storm and today touchscreen phones account for almost half (43 per cent) of all UK sales. However, the technology has filtered down the value chain and non-smart cheaper touchscreen devices like the Samsung Tocco and the LG Viewty are accelerating the decline in contract average spend per user (ARPU), which is now 13 per cent lower than it was this time last year, the height of the recession.
Users of non-touchscreen handsets are spending 12 per cent less on using their mobile per month than they were last year, but the comparable decrease amongst users of non-smart touchscreen handsets is 23 per cent, according to TNS. The result is severely squeezed margins for both carriers and handset manufacturers.
In stark contrast, ARPU among touchscreen phone users with advanced operating systems, such as Apple’s iPhone and BlackBerry’s Storm, is up by an average of £5 per month.
The research house’s study reveals that consumer misunderstanding is to blame, with consumers not aware of the difference between a phone with an advanced operating system and a touchscreen phone with a basic operating system. As long as a phone looks like a high end smartphone, the average Brit will think that it is one and go for the cheapest deal they can find.
While this may mean operators are able to grow their customer base, by offering touchscreen handsets, they will be doing so at the expense of their margins.
Paul Moore, director at TNS ComTech, said: “Although it is all too easy to attract value driven customers with non-smart touchscreen phones, carriers and manufacturers alike need to think long and hard about their handset portfolio and the effect that handset types are having on customer value. They should take care to educate consumers about the differences between operating systems and not simply punt phones that drive volume sales but contribute negatively to value. Conditions in the mobile market are tough and will remain so for some time. It is up to the industry to find long term solutions to better engage consumers rather than quick fixes that will escalate the drop in the value of the market.”
I’m trying to understand why consumer confusion between a smart and non-smart touchscreen device would reduce ARPU. Is the research house saying that it’s a result of people purchasing lower-value price plans or that their usage has decreased? The former I can believe, the later doesn’t stack-up as the features available to them even on a low end touchscreen would likely map what they were previoulsy using.
This is a very strange article, mixing up cause and effect as well as confusing time with money. It fails to provide any evidence to support the headline.
Has the usage (time) declined by 12% and 23%, or is it the revenue? It is unlikely to be both, because tariffs and bundles change frequently.
Could it not be that lower-value customers are attracted to lower-cost handsets? And these very same customers are spending less because of better-value bundles? If this were true (and I think it a more likely explanation), then clearly touchscreen handsets are not *driving* declining revenues.
Hi all. To clarify: our data shows that the customers who are now acquiring non-smart touch handsets were previously higher value customers (in terms of monthly bill spend). For example, those who switched from smart touchscreen to non-smart touchscreen went from spending on average £38.11 per month to £32.14 per month. Those who transferred from non-touchscreen to non-smart touchscreens spent more than 12% less per month after the transfer. Whichever way we look at the data, the consumers that own non-smart touchscreen phones are spending less than other market segments (when they were previously higher value customers). As you mention above, these consumers are generally “value seekers” (tariff wise and handset wise), but this does not take away from the fact that operators and manufacturers should focus on how the tariff and handset mix could be better used to improve this group’s ARPU.
It is not clear from the artcle if there a direct corelation between the decline and the “touch screen” handsets. The decline in user spending could have happened even with a non-touch screen handset user following the same switching pattern. Or is the author saying that this decline is only among users who switched touch screen handsets?
Paul, as much as the article points out to the operators what they might be doing wrong in terms of attracting volume and not possibly attracting value. It is impossible to say that the non-smart touchscreen phones are responsible for what the article termed decline in UK spending. In the current economic climate, people have generally become wiser with how they “lose money” and more in tune with cost-control. Across the board, operators are trying to attract customers by reducing cost of contracts. A lot of factors other than the handset type might be responsible for this price model. Also remember that VAT has been reduced which might be responsible for the sort of spending decline quoted “on average £38.11 per month to £32.14 per month.”
Or, it could just be that customers are getting “smarter”, and the gravy train for cell phone companies is coming to an end.