British consumers push for more flexible tariffs from network operators

Pre-Pay Bundles are proving popular amongst consumers young and old.
23 February 2021
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jennifer chan

Global Strategic Insight Director

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For several years, consumers in Great Britain have been moving from traditional phone contracts to SIM Only (SIMO) plans, looking to reduce the rising costs applied by handset manufacturers and network operator contracts. SIMO plans accounted for 43% of all Smartphone tariffs in December 2020, +5ppt increase on the previous year and overtaking traditional contracts for the first time.

More recently we are experiencing the emergence of ‘Pre-Pay Bundles’ from providers such as GiffGaff, SMARTY and VOXI. In December 2020, these three providers had a combined 6% market share of all Smartphone connections. Once a consumer’s traditional contract ends and they have paid off their handset, they are moving to Pre-Pay Bundles. In 2020, 31% of consumers on a Pre-Pay Bundle moved from a traditional contract.

These new Pre-Pay Bundle plans entice consumers with a simple, flexible and good value offer. Consumers simply pay upfront for a packaged bundle of calls, texts and data. The subscriptions roll over month by month, providing consumers with the flexibility to change both their plan and network provider. 43% of consumers that moved to a Pre-Pay Bundle offering were seeking a larger package of calls, texts and data for less money, an over-index of 146 v total market.

With no contracts and a distinctive offering, Pre-Pay Bundles are proving popular amongst a range of consumers both young and old. GiffGaff, SMARTY and VOXI notably over-index amongst students, due in large part to their residual value offerings such as unlimited social media and offering money back for unused data.

So where are these Pre-Pay Bundle customers coming from?

GiffGaff, VOXI and SMARTY are predominantly gaining consumers from the big four Mobile Network Operators (MNOs): EE, 02, Three and Vodafone. EE is experiencing the greatest loss to these networks accounting for 19% of their acquisition. This is obviously eating into the MNOs’ share, with EE, O2 and Vodafone all experiencing NET customer losses. Three is the exception, holding firm through its compelling value offerings (currently offering consumers half price for the first 6 months).

Increased consumer flexibility ultimately threatens retention rates. Mobile Network Operators are implementing tactics to encourage loyalty, for example Tesco Mobile offers customers a free Club Card Plus subscription for 6 months, saving them money on their weekly shop. However, it doesn’t appear that these offerings are currently doing enough. 18% of Pre-Pay Bundle consumers cite limited rewards/discounts as an area of dissatisfaction with their plan (the top driver).

Pre-Pay Bundle providers are probably also being helped by the fact that increasingly consumers are embracing the shift to online purchasing that has been necessitated through COVID-19, and which has caused retail store closures. 58% of Smartphones connected to Pre-Pay Bundles are purchased online (over-index of 128). This aligns well with ‘online native’ network operators such as GiffGaff, VOXI & SMARTY that don’t have a bricks and mortar offering. For future growth, as consumers adjust and switch to ecommerce, it is increasingly important that network operators offer consumers an easy online solution. 43% of consumers that purchased their Smartphone online in the 3 months to December 2020 had never purchased online before.

Be it a symptom or a cause, the plans are also driving up the length of time consumers hold onto their smartphones. 20% of Pre-Pay Bundle subscribers have owned their device for 24-29 months (v 11% total market).

So which phones are these Pre-Pay Bundle consumers purchasing to use with their flexible plans?

Are they using money saved on plans and spending on premium phones?

Actually, Pre-Pay Bundle subscribers are more likely to own cheaper handsets. 64% spent <£600 on their handset v 60% total market. They also under-index with iPhone and Samsung devices. Rather, they are more likely to own Huawei/Honor. Huawei/Honor consumers are increasingly coming to the end of their contracts and opting to hold onto their device as there isn’t a feasible Huawei/Honor alternative given the US Entity List ban.

As consumer confidence and discretionary spend continues to be affected by the global health crisis, we expect sustained growth in the Pre-Pay Bundle space. GiffGaff, SMARTY and VOXI are set to face increasing competition and response from the wider market. Whilst the value that these plans offer is crucial, consumers are also seeking additional rewards. Will we see network providers attempt to carve out their own USP through reward/loyalty incentives? With wider telco market trends such as 5G and eSIMS, Kantar will be tracking how Pre-Pay Bundles evolve throughout 2021.

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