Smartphone sales are keeping the flagging UK mobile market afloat, shielding it from the full force of the downturn, with consumers spending more - even as they are cutting back everywhere else.
TNS's Global Telecoms Insights study into the global mobile phone market shows that consumers are already trimming their mobile bills by £4 per month, but smartphone sales are sky-rocketing. This will boost operators' revenues in two ways - handset sales and data traffic.
Last year 23% of all handset sales were smartphones, compared to only 13% in 2007. This trend will continue; a quarter of Brits now say that their next mobile will be a smartphone.
At the present growth rate, they will generate extra sales worth £470m this year alone. This is a clear signal to both operators and handset-makers to focus on the smartphone market if they want to come out of the recession in good health.
Value of smartphones
Smartphone users are by far the most profitable of mobile phone users. Smartphone users spend an average of £128 on their handsets, more than twice the £63 non-smartphone owners spend. They also spend twice as much on their monthly bills - £41 against £21.
The figures suggest there is a robust and healthy market for smartphones. Even mobile services, which are often criticised for being user-hostile, are enjoying increased popularity on the back of the smartphone boom. This is because 77% of smartphone owners use their mobile e-mail regularly. Some 40% use the global positioning system, and 38% use instant messaging regularly. These figures hover at just 3% for non-smartphone owners.
Mobile services have grown a lot in two years. Sending videos and listening to music are top, growing 75% and 72% respectively last year. Video penetration is low at 14%, which may help explain the high growth. Sending still pictures was up 63% and listening to the radio rose 57% (see graph).
Whether usage growth is down to the smartphone is debatable, but phone owners reported using most or all of the available features.
Although the emergence of more sophisticated mobile phones seems to have contributed to the growth in services, some growth may have resulted from the advertising push by operators and handset manufacturers around specific packages, such as Nokia's Comes with Music package and T-mobile's Life's for Sharing campaign.
The Global Telecoms Insights study shows that smartphone users do more research before buying their handsets. Half use online consumer reviews to gather information, compared with only 30% of non-smartphone users.
Effect of the iPhone
Apple's iPhone created unprecedented hype that has had a knock on effect on the whole industry. Despite the recession, mobile users are now willing to spend on average £12 more on their next mobile than they paid for their last one.
The snag is, they may delay the upgrade due to the recession. For example, TNS' ComTech study shows that last year prepay users renewed their phones in 34 months rather than 28 months in 2007.
But there is some more bad news for operators. The emergence of best-selling smartphone brands such as the iPhone and Google's Android has shifted market power from operators to handset manufacturers. Consumers want particular phones, and do not base their decision purely on the best available deal anymore.
Operators need to get the best-selling smartphone makers on-side, ideally tying them in as O2 did with Apple and the iPhone. Many operators have not caught on, continuing instead with their low-cost drive.
Although this makes superficial sense as the recession drives down prices, to ensure their longer term financial health the mobile operators need to align themselves more closely with handset manufacturers - and even with the electronics companies that are now joining the smartphone fray.
Table 1: 2007/2008 Mobile service growth rates
|Service||Penetration||Growth from 2007 to 2008|
|Listening to music||31%||72%|
|Connected phone to computer||25%||-|
|Browsing the internet||24%||33%|
|Listening to the radio||22%||57%|
* Insufficient data to compile a meaningful change percentage
About TNS' Global Telecoms Insights Study
TNS' Global Telecoms Insights Study covers 32 markets and 20,000 consumers. It addresses some of the most pressing themes in the telecoms industry and looks to understand the evolution of global, regional and local trends in mobile technology.
TNS ComTech is the world's largest syndicated research project measuring the converging markets of mobile telecoms, fixed line, broadband and Pay TV.
A panel of more than 170,000 consumers, demographically represented across the five key European countries, are interviewed every four weeks on their behaviour across mobile, broadband, fixed line and TV.
Sam Curtis is sector development manager at TNS Technology