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24th March 2021

The Death of the Mobile Phone Contract

In 2007 Steve Jobs introduced the first iPhone, a revolution for the smartphone, combining the iPod, Phone and Internet in one easy to use device. The creation of the App Store promised one device with infinite uses. The Mobile phone market has grown exponentially, in the UK, 9 out of 10 children have their own mobile device. The smartphone has become the essential companion to the Youth of today.

As the prices of mobile phones increased, mobile phone contracts have facilitated and obscured the cost for the customer. By paying £25 a month over a two-year period, the customer had easy access to the newest phone with all the latest features. Over the last decade, mobile operators have happily controlled the market with this business model.

The release of the iPhone X in 2017 marked a cultural turning point, setting a new norm of over £1000 for the cost of a smartphone. At a time where mobile phone upgrades have become evolutions and no longer revolutions, have the giants gone too far and lost a grip on the market? Is the promise behind the purchase starting to smell like snake oil for the consumer? What does this mean for the Telecoms industry?

Fast forward nearly two decades on from the original iPhone release, the iPhone 12 can now cost an eye watering £67 a month and, with upgrades becoming less and less groundbreaking, having the latest phone isn’t essential anymore. With retro fashion and a market for upcycling, the Nokia 3310 could even be considered fashionable these days. Different commodities are now vying the disposable income of Millennials and Gen – Z’s wallets, with record high University fees, a nation of fast fashion and takeaways and the tremendous cost of rent.

As people are looking for cost effective alternatives, Pay As You Go plans and SIM only contracts are becoming more favourable. With Lebara’s SIM only contract, it only costs the customer £7.50 a month for 15GB of data and unlimited calls and texts.

Socially people are now looking to loosen the tie between themselves and their mobile. The promise of the mobile phone being a platform for people to connect is fracturing, as consequences of its prolonged usage are coming to light. In 2018 there were 6,944 suicides in the UK. The recent Netflix documentary ‘The Social Dilemma’ linked this rise of mental illnesses within young children and adults to our new obsession with social media and mobile use. China has just banned mobile phones in schools to try to improve concentration, eyesight and prevent Internet addiction in children. As people start to try and moderate their usage and the desire to overspend is beginning to fade.

The shift in psyche and volatility of demand within the mobile phone market has created exciting opportunities for MVNO’s, who have become the front-runners for Pay As You Go and SIM only plans. This has been illustrated by the recent growth and interest surrounding MVNOs discussed in our recent post ‘Data… The New Crude Oil Driving MVNO Consolidation’.

Traditionally, MVNO’s sat in a niche market, offering customers value added services. One example of this is providing specialised plans for migrants and expats by offering multi country numbers, lower roaming charges and cheap long distance calls. SIM only plans have been introduced to meet the changing demands of the youth wanting mobile data compared to minutes within their plans. Companies, such as BT and Tesco Mobile have used their strong established brand awareness and loyal customers to set up successful MVNOs at a reduced cost. Creating new branding also means that MVNOs can promote themselves as being transparent and draw in customers who have had previous bad experiences with the large mobile operators.

But now people are also looking for cost effective alternatives in regard to their mobile bills and MVNOs are equipped with the product and ready supply to meet this change in demand.

The technology sparkle may be fading in the mobile handset industry, but opportunities are shining out for the MVNO sector. Innovation is slowing down. The future of the mobile phone contract is fast becoming unstable in the hands of a generation raised on a touchpad, leaving MVNOs best placed to meet the needs of this techno-Gen.

Written by Lottie Cooper, Data Research Executive at Squire Technologies.

Lottie Cooper is a recent addition to the team at Squire Technologies, joining us during last year’s lockdown as a Data Research Executive. Lottie holds a Bachelor of Science (Honours) after recently graduating from the University of Liverpool with a focus on Geophysics. Lottie brings a Gen Z view of consumer demands of telecoms operators and technology providers at large.