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Mobile Network Providers - UK - February 2015

“When it comes to selling triple-play packages, the mobile industry still has a large proportion of pay-as-you-go and rolling month-by-month contract customers to market to, free of restrictions on when they can enter into new agreements.”

– Samuel Gee, Senior Technology and Media Analyst

This report covers the following issues:

  • Is there a market for triple-play mobile offerings?
  • Average revenue per user (ARPU) is consistently falling

The mobile network provider market may see some shake up over 2015, with BT’s purchase of EE moving the incumbent fixed-line provider back into the mobile sphere for the first time since it divested itself of O2 (née BT Cellnet) in 2002, undoubtedly with an eye toward offering triple- or quad-play bundles including a mobile element.

In a market with less than 2% change in market value year on year since 2008, this may be just the approach to break into rich new revenue streams – but it may also prove a damaging distraction, running aground on the same lack of interest for quad-play bundles that fixed-line operators have been encountering in consumers for years.

This report examines these issues, as well as the network operator and type of mobile connection consumers currently have. It also looks at their contract duration, the amount they pay monthly for their phone service and the motivations they had in choosing their current provider. Finally, it looks at consumer attitudes and feelings about operator-provided mobile wallets.

This report looks at the scope of mobile network usage by consumers.

Mobile networks are defined as networks providing either data, voice or SMS facilities down to a mobile device. Data delivered over Wi-Fi is not included under the “data” category.

Primarily, this report refers to the use of mobile networks through traditional mobile phones or smartphones. However, reference at times is made to tablet devices, as these can connect to mobile networks for data.

Network connections can come in two forms – pre-paid and post-paid. The former involves buying credit for a phone, which is then worked through. The latter refers to the use of a handset with a monthly contract charge covering the previous month’s usage.

Pre-paid is better known to consumers as “pay-as-you-go”, and is referred to as such throughout the consumer sections of this report. Similarly, “post-paid” is better known to consumers as “contract”, and is referred to as such throughout the consumer sections of this report.

Historical market size data for this report is taken from the Ofcom Communications Market Report 2014, with forecasting carried out by Mintel.

Market size covers the volume of mobile network connections sold to consumers. This includes data-only tablet device connections, as well as dongle connections to a portable router designed to provide internet services by connecting to the mobile network. Market size also covers the value of those connections at retail.

The “Big Four” are the four largest networks in the UK: Vodafone, EE, Three and O2.

 

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Table of contents

  1. Introduction

      • Definitions
        • Abbreviations
        • Executive Summary

            • The market
              • Figure 1: Forecast retail value of mobile network connection sales, 2009-19
            • Market factors
              • Penetration of mobile devices grows
                • EE and Vodafone explore quad-play content
                  • BT in exclusive talks to acquire EE
                    • Companies, brands and innovation
                      • Figure 2: Consumer mobile network providers, November 2014
                    • The consumer
                      • Connection type
                        • Figure 3: Consumer connection types, November 2014
                      • Contract length and connection cost
                        • Figure 4: Contract length, November 2014
                        • Figure 5: Consumer mobile connection monthly spend, November 2014
                      • Motivations for choosing network provider
                        • Figure 6: Reason that consumers chose their network provider, November 2014
                        • Figure 7: Ranking in importance of factors that led consumers to choose their mobile network provider, November 2014
                      • Opinions toward mobile wallets
                        • Figure 8: Mobile user interest in mobile wallets, November 2014
                        • Figure 9: Reasons consumers are interested in mobile wallets, by interest in mobile wallets, November 2014
                        • Figure 10: Reasons that consumers opposed to mobile wallets have no interest in the service, November 2014
                      • What we think
                      • Issues and Insights

                          • Is there a market for triple-play mobile offerings?
                            • The facts
                              • The implications
                                • Average revenue per user (ARPU) is consistently falling
                                  • The facts
                                    • The implications
                                    • Trend Application

                                        • Trend: Help Me Help Myself
                                          • Trend: Prove It
                                          • Market Drivers

                                            • Key points
                                              • More devices exist to drink down mobile data
                                                • Figure 11: Device ownership, November 2009-October 2014
                                              • Government pushing faster elimination of ‘not spots’
                                                • EE and Vodafone explore quad-play content
                                                  • BT in exclusive talks to acquire EE
                                                    • Contract restructuring becomes industry standard
                                                    • Who’s Innovating?

                                                      • Key points
                                                        • Telefonica UK’s trusted network program is a sensibly named alternative
                                                          • EE moves into triple-play
                                                            • O2 embrace Puls watch to align with music heritage
                                                            • Market Size and Forecast

                                                              • Key points
                                                                • Steady market will suffer no major fluctuations.
                                                                  • Figure 12: Value of retail mobile network connections revenue, 2009-19
                                                                  • Figure 13: Volume of mobile network connections, 2009-19
                                                                • Forecasts
                                                                    • Figure 14: Forecast retail value of mobile network connection revenue, 2009-19
                                                                    • Figure 15: Forecast volume of mobile networks connections, 2009-19
                                                                • Market Segmentation

                                                                  • Key points
                                                                    • Post-paid continues to account for majority of connections
                                                                      • Figure 16: Total mobile connections by pre-paid and post-paid, 2008-13
                                                                      • Figure 17: Operator pre-paid/post-paid customer split, 2013/2014
                                                                    • Outgoing call minutes show a slight increase
                                                                      • Figure 18: Outgoing call minutes by pre-paid and post-paid mobile connections, 2008-13
                                                                    • Shift to post-paid keeps average revenue steady
                                                                      • Figure 19: Average mobile revenue per user, 2008-13
                                                                    • Mobile operator revenue overwhelmingly voice-related
                                                                      • Figure 20: Mobile service retail telecoms revenue, 2008-13
                                                                      • Figure 21: Internet-connected messages and SMS messages, 2007-14
                                                                      • Figure 22: Share of mobile revenue by service, 2008-13
                                                                  • Companies and Products

                                                                      • Telefónica UK Limited (O2)
                                                                        • Company history
                                                                          • Financials and future strategy
                                                                            • Figure 23: Telefonica UK key financial data, 2011-13
                                                                            • Figure 24: Telefonica UK product accesses, 2011-13
                                                                            • Figure 25: Telefonica UK’s key user data, 2011-13
                                                                          • Vodafone Group Plc
                                                                            • Company history
                                                                              • Financials and future strategy
                                                                                • Figure 26: Vodafone UK key financial data, 2012-14
                                                                              • Everything Everywhere Limited
                                                                                • Company history
                                                                                  • Financials and future strategy
                                                                                    • Figure 27: EE key financial data, 2012-13
                                                                                  • Hutchison 3G UK Limited (Three)
                                                                                    • Company history
                                                                                      • Financials and future strategy
                                                                                        • Figure 28: Three UK key financial data, 2012-13
                                                                                        • Figure 29: Three ARPU, 2013
                                                                                        • Figure 30: Three mobile customers, 2012-13
                                                                                      • Brand communication and promotion
                                                                                        • Top ten account for almost entire market’s adspend
                                                                                          • Figure 31: Top ten advertisers of mobile network connections, 2010-13
                                                                                          • Figure 32: Big Four adspend, by category, 2013
                                                                                        • Post-paid takes majority of industry spend
                                                                                          • Figure 33: Total mobile network connection adspend by category, 2010-13
                                                                                      • Brand Research

                                                                                        • Brand map
                                                                                            • Figure 34: Attitudes towards and usage of selected brands, November 2014
                                                                                          • Correspondence analysis
                                                                                            • Brand attitudes
                                                                                              • Figure 35: Attitudes, by brand, November 2014
                                                                                            • Brand personality
                                                                                              • Figure 36: Brand personality – Macro image, November 2014
                                                                                              • Figure 37: Brand personality – Micro image, November 2014
                                                                                            • Brand experience
                                                                                              • Figure 38: Brand usage, November 2014
                                                                                              • Figure 39: Satisfaction with selected brands, November 2014
                                                                                              • Figure 40: Consideration of selected brands, November 2014
                                                                                              • Figure 41: Consumer perceptions of selected brand performance, November 2014
                                                                                            • Brand recommendation
                                                                                              • Figure 42: Recommendation of selected brands, November 2014
                                                                                          • The Consumer – Network Operator and Type of Contract

                                                                                            • Key points
                                                                                              • Consumers still identify with T-Mobile and Orange
                                                                                                  • Figure 43: Consumer mobile network providers, November 2014
                                                                                                • O2, EE lack distinct appeal to age
                                                                                                  • Figure 44: Use of “Big Four” providers by age, November 2014
                                                                                                • Over six in ten are on contract
                                                                                                  • Figure 45: Consumer connection types, November 2014
                                                                                                  • Figure 46: Contract type by age, November 2014
                                                                                                • Pay-as-you-go and contract customers favour networks similarly
                                                                                                    • Figure 47: Connection type, by mobile network providers, November 2014
                                                                                                  • Contract customers more loyal to the format
                                                                                                  • The Consumer – Contract Length and Connection Cost

                                                                                                    • Key points
                                                                                                      • Over half of contracts still for two years
                                                                                                          • Figure 48: Contract length, November 2014
                                                                                                          • Figure 49: Contract customer contract length, by age, November 2014
                                                                                                          • Figure 50: Contract length by mobile network provider, November 2015
                                                                                                        • Virgin’s use of mobile as a bundle booster is apparent
                                                                                                            • Figure 51: Contract length by select mobile virtual network provider, November 2015
                                                                                                          • Average pay-as-you-go spend four times lower than contract
                                                                                                              • Figure 52: Consumer mobile connection monthly spend, November 2014
                                                                                                            • Younger consumers still spend more on pay-as-you-go, up to a point
                                                                                                                • Figure 53: Pay-as-you-go monthly spend, by age, November 2014
                                                                                                              • Spend by provider
                                                                                                                  • Figure 54: Contract spend, by mobile network provider, November 2014
                                                                                                              • The Consumer – Motivations for Choosing Network Provider

                                                                                                                • Key points
                                                                                                                  • Cost most popular but not most important factor
                                                                                                                      • Figure 55: Reason that consumers chose their network provider, November 2014
                                                                                                                    • Inertia the most commonly selected reason for network choice
                                                                                                                        • Figure 56: Ranking in importance of factors that led consumers to choose their mobile network provider, November 2014
                                                                                                                      • Differences in motivation by age
                                                                                                                        • Differences by provider
                                                                                                                          • “Generosity” most commonly associated with low value
                                                                                                                          • The Consumer – Opinions towards Mobile Wallets

                                                                                                                            • Key points
                                                                                                                              • Majority have no interest in mobile wallets
                                                                                                                                  • Figure 57: Mobile user interest in mobile wallets, November 2014
                                                                                                                                • New EE customers differ to legacy T-Mobile/Orange
                                                                                                                                  • Figure 58: Proportion of mobile provider customers interested in mobile wallets, November 2014
                                                                                                                                • Convenience of paying with phone most appealing feature to those unsure
                                                                                                                                    • Figure 59: Reasons consumers are interested in mobile wallets, by interest in mobile wallets, November 2014
                                                                                                                                  • Domestic operators generate trust?
                                                                                                                                    • Opposition focused on fraud
                                                                                                                                      • Figure 60: Reasons that consumers opposed to mobile wallets have no interest in the service, November 2014

                                                                                                                                  Companies Covered

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

                                                                                                                                  Mobile Network Providers - UK - February 2015

                                                                                                                                  £1,995.00 (Excl.Tax)