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Bundled Communications Services - UK - January 2015

“Including a free tablet with a data connection would induce the customer into a quad-play contract, with a mobile SIM attached to their name. It would increase the number of connected devices in the consumer’s home, leading to a greater liklihood of the user upgrading to a superfast connection down the line. Finally, it may well habituate the user to using video on demand services, which the telco can then use as an ancillary source of revenue.”
– Samuel Gee, Senior Technology and Media Analyst

This report discusses the following key topics:

  • Increase in use of data-driven service represents an opportunity for fixed-line operators
  • Free data might boost older use of superfast

The market for communications services has shifted to a more level playing field, with each of the big four fixed-line telco firms – TalkTalk, Sky, Virgin and BT – now offering each of the three main services: TV, fixed-line telephony and fixed-line internet. Heritage specialities – like Sky’s focus on TV or TalkTalk’s persistently low-cost broadband – mean that their brands remain distinct, but as each tries to push consumers into the triple-play bundle, these differences risk becoming overshadowed by a standardised offering.

This report looks at the current sale of and interest in bundled communication services, including the types of bundlesconsumers currently take, who they have them with, how much they pay for them per month, the motivations behind their most recent choice of provider, and which optional free extras might convince them to choose one bundle over another.

Bundled comms providers will continue to trade off their speciality product to demonstrate uniqueness in a market where all the major players are pushing for triple-play sales. Whilst it has invested enormous sums in securing football broadcast rights over 2014, BT remains the provider with the least obviously unique identity. Without a clearly defined primary offering – such as Sky has with pay-TV, TalkTalk with low-cost packages and Virgin with cable internet – the company will suffer in any consumer comparison. The possible takeover of EE by BT in 2015 may result in Ofcom mandating that the consumer arm of BT be spun off from the wholesale and business operations. If this happens, it will be an excellent opportunity for the company to rebrand its consumer focused operations with a more concise image that relies less on the weight of its heritage.

Consumers are favouring data-driven communication services more each year. As this process progresses they will respond well to a quad-play package that adapts to their usage across three platforms: fixed-line data connections, mobile data connections and mobile Wi-Fi. Clever use of mobile Wi-Fi hotspots that offload data usage when out the house across their faster, cheaper public broadband networks is one potentially powerful point of differentiation. However, this is a long term view – at the moment the demand for quad-play from consumers seems distinctly lacking.

 

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Table of contents

  1. Introduction

      • Definitions
        • Abbreviations
        • Executive Summary

            • The market
              • Figure 1: Forecast value of operator revenue from the sale of communications services*, 2009-19
            • Market factors
              • Changing content format preferences will boost need for fast internet
                • Superfast take up is increasing
                  • “Mobile-only” and “mobile-inclusive” households both fail to materialise
                    • Companies, brands and innovation
                      • Figure 2: Consumer bundle providers, November 2014
                    • The consumer
                      • Landline-inclusive products and bundles taken
                        • Figure 3: Consumer landline ownership, November 2014
                        • Figure 4: Other products in consumer phone line bundles, November 2014
                        • Figure 5: Bundles that do not include a landline taken by consumers, November 2014
                      • Type of internet
                        • Figure 6: Type of internet connection consumers have, November 2014
                      • Bundle provider and cost
                        • Figure 7: Consumer bundle providers, November 2014
                        • Figure 8: Monthly bundle cost, November 2014
                      • Motivations behind consumer bundle purchase
                        • Figure 9: Bundle choice motivations, November 2014
                        • Figure 10: Consumer influences on bundle purchase, November 2014
                      • What we think
                      • Issues and Insights

                          • Increase in use of data-driven service represents an opportunity for fixed-line operators
                            • The facts
                              • The implications
                                • Free data might boost older use of superfast
                                  • The facts
                                    • The implications
                                    • Trend Application

                                        • Trend: Collective Intelligence
                                          • Trend: Giving Back
                                            • Mintel Futures: Old Gold
                                            • Market Drivers

                                              • Key points
                                                • Government rolls back focus on rural rollout
                                                  • Increasing device ownership will boost need for fast internet
                                                    • Figure 11: Device ownership, November 2009-October 2014
                                                    • Figure 12: TV sales by smart and non-smart, 2012-14 (e)
                                                    • Figure 13: Spotify global free and paid customers, March 2011-November 2014
                                                    • Figure 14: Netflix global customers, Q4 2002-Q4 2013
                                                  • …and superfast take up is increasing accordingly
                                                    • Figure 15: UK superfast connections, Q1 2010-Q1 2014
                                                  • Data/mobile continue to exert pressure on outgoing call minutes
                                                    • Figure 16: Total outgoing call minutes from fixed-line, pre-pay and post-pay connections, 2008-13
                                                    • Figure 17: Internet-connected messages and SMS messages, 2007-14
                                                  • “Mobile-only” and “mobile-inclusive” both fail to materialise
                                                    • Figure 18: Household penetration of fixed and mobile telephony, 2009-14
                                                • Who’s Innovating?

                                                  • Key points
                                                    • Project Genesis pre-empts faults to boost customer satisfaction
                                                      • Virgin releases wristband that records TV when wearer falls asleep
                                                        • EE launches set top box
                                                        • Market Size and Forecast

                                                          • Key points
                                                            • Communications services on steady value growth
                                                              • Figure 19: Operator revenue from the sale of communications services*, 2009-19
                                                              • Figure 20: Operator revenue from the sale of pay-TV, 2009-19
                                                              • Figure 21: Operator revenue from the sale of fixed-line phone services, 2009-19
                                                              • Figure 22: Operator revenue from the sale of internet and broadband services, 2009-19
                                                            • Forecasts
                                                                • Figure 23: Forecast value of operator revenue from the sale of communications services*, 2009-19
                                                                • Figure 24: Forecast value of operator revenue from the sale of internet services, 2009-19
                                                                • Figure 25: Forecast value of operator revenue from the sale of fixed voice services, 2009-19
                                                                • Figure 26: Forecast value of operator revenue from the sale of pay-tv services, 2009-19
                                                            • Market Share and Segmentation

                                                              • Key points
                                                                • TalkTalk’s share of fixed connections declines despite net growth
                                                                  • Figure 27: Fixed-line internet connection market share, 2008-13
                                                                • BT’s share of phone minutes
                                                                  • Figure 28: Share of fixed voice call minutes, 2008-13
                                                                • TalkTalk surpasses BT’s share of TV
                                                                  • Figure 29: Volume of UK TV households, by provider, 2013 and 2014
                                                                  • Figure 30: Share of pay-TV subscriptions, 2011-14
                                                                • Share of triple-play content
                                                                  • Figure 31: Share of triple-play homes, 2008-14
                                                              • Companies and Products

                                                                  • British Sky Broadcasting Group
                                                                    • Background
                                                                      • Financial performance and strategy
                                                                        • Figure 32: Select financial information, British Sky Broadcasting Group, 2012-14
                                                                      • BT Group plc
                                                                        • Background
                                                                          • Financial performance and strategy
                                                                            • Figure 33: Select financial information, BT Group PLC, 2012-14
                                                                          • Virgin Media Inc
                                                                            • Background
                                                                              • Financial performance and strategy
                                                                                • Figure 34: Select financial information, Virgin Media Inc, 2012-13
                                                                              • TalkTalk Telecom Group plc
                                                                                • Background
                                                                                  • Financial performance and strategy
                                                                                    • Figure 35: Select financial information, TalkTalk Telecom Group plc, 2013-14
                                                                                • Brand Communication and Promotion

                                                                                  • Key points
                                                                                    • Triple-play takes a bigger proportion of industry adspend
                                                                                      • Figure 36: Proportion of fixed-line telco adspend by category, 2010-13
                                                                                      • Figure 37: Annual adspend on triple-play bundles, by company, 2010-13
                                                                                    • Sky defies convention in keeping spend focused on TV
                                                                                      • Figure 38: Telco adspend by category, 2010-13
                                                                                      • Figure 39: Telco adspend by bundle/service type, 2013
                                                                                  • Brand Research

                                                                                    • Brand map
                                                                                        • Figure 40: Attitudes towards and usage of selected brands, October 2014
                                                                                      • Correspondence analysis
                                                                                        • Brand attitudes
                                                                                          • Figure 41: Attitudes, by brand, October 2014
                                                                                        • Brand personality
                                                                                          • Figure 42: Brand personality – Macro image, October 2014
                                                                                          • Figure 43: Brand personality – Micro image, October 2014
                                                                                        • Brand experience
                                                                                          • Figure 44: Selected brand usage, October 2014
                                                                                          • Figure 45: Satisfaction with selected brands, October 2014
                                                                                          • Figure 46: Consideration of selected brands, October 2014
                                                                                          • Figure 47: Consumer perceptions of selected brand performance, October 2014
                                                                                        • Brand recommendation
                                                                                          • Figure 48: Recommendation of selected brands, October 2014
                                                                                      • The Consumer – Landline-inclusive Products and Bundles Taken

                                                                                        • Key points
                                                                                          • Youth much more likely to abandon landlines
                                                                                            • Figure 49: Consumer landline ownership, November 2014
                                                                                            • Figure 50: Consumers who do not have a landline phone service, by age and gender, November 2014
                                                                                          • Internet almost universally bundled with phone lines
                                                                                              • Figure 51: Other products in consumer phone line bundles, November 2014
                                                                                              • Figure 52: Other products in consumer phone line bundles, by age, November 2014
                                                                                              • Figure 53: Other products in consumer phone line bundles, by gross annual household income, November 2014
                                                                                            • Dual play landline and TV the most popular
                                                                                              • Figure 54: Bundles taken by consumers with a landline phone service, November 2014
                                                                                            • High presence of media technology in quad-play homes
                                                                                              • Figure 55: Presence of select technologies in the home by bundles taken by consumers with a landline phone service, November 2014
                                                                                            • A third have non-landline inclusive bundle
                                                                                                • Figure 56: Bundles that do not include a landline taken by consumers, November 2014
                                                                                                • Figure 57: Non-landline service inclusive bundles taken by consumers, by age, November 2014
                                                                                            • The Consumer – Type of Internet

                                                                                              • Key points
                                                                                                • Just over a third of consumers are superfast
                                                                                                  • Figure 58: Type of internet connection consumers have, November 2014
                                                                                                  • Figure 59: Type of internet in consumer bundles, November 2014
                                                                                                • Superfast most common with quad-play
                                                                                                  • Figure 60: Type of internet in consumers’ bundles, by bundles consumers take, November 2014
                                                                                                • Superfast internet customers more likely tech owners
                                                                                                • The Consumer – Bundle Provider and Cost

                                                                                                  • Key points
                                                                                                    • Sky the most popular provider of bundled services
                                                                                                      • Figure 61: Consumer bundle providers, November 2014
                                                                                                    • …thanks to popularity amongst younger consumers
                                                                                                        • Figure 62: Four most popular bundle providers, by age, November 2014
                                                                                                      • Government mandated responsibility gives BT boost in rural customers
                                                                                                        • Figure 63: Consumer bundle providers, by location, November 2014
                                                                                                      • Bundle costs relatively equally distributed
                                                                                                        • Figure 64: Monthly bundle cost, November 2014
                                                                                                        • Figure 65: Type of internet in bundle, by monthly bundle cost, November 2014
                                                                                                      • Virgin and Sky dominate at the upper bound
                                                                                                        • Figure 66: Bundle providers by monthly bundle cost, November 2014
                                                                                                        • Figure 67: Type of landline-inclusive bundle by monthly bundle cost, November 2014
                                                                                                    • The Consumer – Motivations Behind Consumer Bundle Purchase

                                                                                                      • Key points
                                                                                                        • Inertia the most common reason to choose provider
                                                                                                            • Figure 68: Bundle choice motivations, November 2014
                                                                                                          • Motivations by provider
                                                                                                            • BT
                                                                                                              • Figure 69: Ownership of a BT bundle, by bundle purchase motivations, November 2014
                                                                                                            • Sky
                                                                                                              • Figure 70: Ownership of a Sky bundle, by bundle purchase motivations, November 2014
                                                                                                            • TalkTalk
                                                                                                              • Figure 71: Ownership of a TalkTalk bundle, by bundle purchase motivations, November 2014
                                                                                                            • Virgin
                                                                                                              • Figure 72: Ownership of a Virgin bundle, by bundle purchase motivations, November 2014
                                                                                                            • Free installation the most common and most important influence
                                                                                                                • Figure 73: Consumer influences on bundle purchase, November 2014
                                                                                                                • Figure 74: Ranking of factors selected as influential in selection of bundle purchase, November 2014
                                                                                                              • Free extras communicated by adverts
                                                                                                                • Consumers do not base choices on reputation

                                                                                                                Companies Covered

                                                                                                                To learn more about the companies covered in this report please contact us.

                                                                                                                Bundled Communications Services - UK - January 2015

                                                                                                                £1,995.00 (Excl.Tax)