UK cost-conscious consumers opt for longer mobile phone contracts to manage rising costs
Cost-conscious Brits are committing to longer-term mobile phone contracts to help manage rising costs, according to the latest research from GfK. The longer contracts allow consumers to spread the cost of the latest devices and secure the best tariffs, with the industry benefiting from a guaranteed income. Latest news about UK mobile phone contracts find out below.
As Brits feel the squeeze, GfK’s Telco experts have spotted a trend for committing to longer term mobile phone contracts to manage rising prices. These allow consumers to spread the cost of the latest handsets and lock in the best tariffs, while industry players benefit from guaranteed income in a challenging economy.
Contracts are making a comeback uk mobile phone contracts
Having seen a decline from Q3 last year, smartphone contracts and contract upgrades are enjoying a resurgence. Q1 2022 saw a rise of +5.5% YOY in new contracts taken, compared to the -18.6% YOY rate reported in Q1 2021. Contract upgrades also turned positive YOY, to +0.6% in the first quarter of the year. This too is a turnaround from the decline of -4.5% in Q1 2021. In Q1 2022, 38% of all new handset contracts were in excess of 24 months – a growing trend we expect to continue.
UK cost-conscious consumers opt for longer mobile phone contracts
Neel Bhalsod, Director of Client Insight at GfK, says: “The network operators are offering extended contracts with the latest handsets, and these propositions are proving irresistible to canny customers. What this tells us is buying patterns are changing, and contracts of 24 months and above are more attractive if that means getting the most expensive handsets and the best network rates in a cost crunch.”
SIM Only market is swapping flexibility for affordability
This trend is being mirrored in the SIM Only (SIMO) market, where customers choose a tariff for a handset they already own. These buyers are already price conscious users of mobile phones, with 34% purchasing their tariff because “SIM only contracts are cheaper”, so to see them adapting their behaviour points to a sea change in the market.
In Q1 2021, only 22% of new SIM Only contracts were for more than 12 months, with the vast majority – 59% – opting for a shorter, flexible and low cost fixed 12-month contract. By the end of Q1 2022 however the take up of SIMO contracts of 24+ months had more than doubled to 52%, with customers giving up flexibility to fix their rate for a longer period of time. SIMO customers are sacrificing the freedom to shop around for the best deal annually – something they once valued – in favour of more restrictive, longer-term plans that allow them to know and meet their monthly costs.
Price and Value drives 70% of all network switches
‘Price and Value’ has been growing in importance as the reason consumers switch operator since Q3 2019. By Q1 2022, seven in 10 switchers (73%) cited it as their main reason for moving to a new operator. This puts it ahead of connection quality, customer service, brand reputation and word of mouth recommendation.
This finding about changing behaviours in the mobile phone sector is supported by the latest issue of GfK’s long-running Consumer Confidence Index. April 2022 saw the headline confidence score at a near historic low, with the scores for the next 12 months for personal finances at -26. The Major Purchase Index – which asks if now is a good time to buy – was low at -32, so it’s no surprise that consumers are extremely cautious about spending. With mobile phones considered an essential item – akin to a utility – consumers are doing all that they can to keep this necessary cost manageable.
Lizzie Bailey, Key Account Director for Telco, Tech & Durables at GfK says: “We’re seeing two forces combine to drive these trends in the UK’s mobile phone market. On the demand side, consumers are looking to secure the most competitive tariffs and get the latest technology for the best rates today in anticipation of rising prices tomorrow. On the supply side, the operators are pushing customers towards longer contracts. Two fifths of contracts are for 24+ months, and a tenure of 36+ months is becoming more acceptable. These longer commitments gives both consumers and network operators some future security in an increasingly uncertain economic environment.”
