Research Notes

Strand Consult: 2002 will bring many changes to the UK market for mobile services

Market will be divided between 4 operators of almost equal size – the battle for customers will be intensified, especially the battle for the most lucrative customers
Operators will further shift their focus from pre-paid to post-paid
Operators will increasingly focus on direct sale through own outlets, via the Internet, direct mail and tele-marketing.
Customers with high ARPU will increasingly be offered free or discounted hardware upgrades
We will see a number of new types of subscriptions, which are more user friendly that those offered today – they will be marketed on their simplicity in use.
Operators will focus strongly on retail loyalty.

Several distributors in the UK market will either fold or become part of a Europe-wide process of consolidation to ensure a presence in several markets.
Economy of scale is key
Distributors will increasingly also offer repair services and other value added services.
Operators will increasingly look to outsource activities to distributors as they shift their focus back onto their core business.

Retailers in general
UK retailers enjoy much higher margins than their European colleagues do. We are certain that these margins will come down on some products. For some product groups, margins will increase.
Operators shift in focus from quantity to quality will affect margins -especially on pre-paid and the most expensive contracts. The difference in margin between the most and least expensive contracts will narrow.
Retailers will increasingly focus on the sale of VAS and accessories.
Operators will reduce their subsidy of marketing activities and less money will be available for COUP.

Specialist shops
2002 will bring further consolidation. Many specialist shops will fold or be swallowed up by either operators or chains like CPW.
We believe that many Specialist shops will reduce the number of operators offered. This will not happen voluntarily, but as a result of pressure from operators.
Shops will experience less traffic and the reduced volume of customers must be better utilised. Those shops who manage this will survive, the rest will not.
2002 will see an increase in the use of direct marketing directed toward existing customers.
We will se more operator controlled shops and less independent ones.

Radio and TV shops
They will find the shift from pre-paid to post-paid difficult.
They will focus less on mobile phones and more on PDA’s
They will suffer under the reduced marketing support from operators.
Their average revenue per customer will fall significantly.

The services
There will be an increase in focus on services based on SMS
Operators will forget about 2.5G services based on WAP/GPRS
A number of large media companies will look to market mobile services
Ring tones and logos will make up an increasingly smaller part of the market
The market for push-based services like sports results, traffic information and other, will grow explosively.
TV stations will use SMS as the basis for interactive voting and chat relating to specific programmes.
We will see an increase in B2B services
The market will suffer from operators singular focus on revenue sharing for SMS and their disregard to similar models for WAP/GPRS.
Norway and South Korea will be seen as market leaders when it comes to implementing mobile services.
Mobile services will be bundled with terminals.

The phones
We will see more phones and brands than before, but fewer producers.
Nokia will loose some of its status.
PDA’s will become increasingly visible. Only problem is that operators are finding it difficult to decide on how to subsidise these terminals.
Phones will be bundled with mobile services
2002 will see the presentation of concept phones. Most will find it difficult to sell in significant numbers.
Retailers will find it difficult to keep up with all the new features new phones offer.

The customers
Customers use of mobile services will increase, and we will see an increase in ARPU from all of the operators.
The growth will come from voice- and SMS-based traffic.
Operators focus on SMS rather than WAP/GPRS will mean that traffic on these services will not grow at the same rate as SMS-based traffic.
It will become increasingly difficult to argue for why customers should buy new phones to replace the existing.
We will se stories telling how GPRS is a failure and who customers are not using it.

3G perspective
Operators will use PR activities to justify their 3G investments
Hutchinson must find the distribution needed to generate the customers needed to ensure a return on their 3G investment.
The one-sided focus on SMS by operators will mean that the press will question the whole project
Japan will loses its status as the hero of 3G and focus will shift to South Korea, which will become the most interesting 3G case.
Microsoft will present their 3G vision
We will see lots of companies begin to offer service platforms for 2.5G and 3G
The press will write about the delays of 3G. In fact 2002 will see a lot of negative press about 3G.
Retailers will complain that phones are not arriving to market as promised.
Predictions 2003
Strand Reports

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