Telecoms Retailing - UK

This report assesses the performance of the retail telecommunications market since the last report in May 2006 and focuses primarily on telephone equipment and related accessories.

Demand for fixed line equipment is weakening as a result of sexier, more innovative mobile technologies. Inevitably the report focuses on this part of the market, which has seen strong growth thanks to rising levels of ownership, now in excess of 85% of the British adult population. New content and features are also key drivers in the mobiles segment, stimulating the replacement market. Phone manufacturers, network providers, independent retailers and consumers have all embraced this rapidly changing marketplace.

Issues in the Market

Polarisation of usage

Retail segmentation

The role of the Internet

Complexity and transparency

Key themes

Definitions

Telephone equipment

Mobile phone packages

Technology definitions

Abbreviations

Market in Brief

Historical trends

Channels of distribution

Market leaders

Figure 1: Where last mobile phone purchased, February 2007

Consumer behaviour

The future

Industry Insight

Key Points

The market

Future growth

It is still a deal-driven market

The network operators

The new mobile phone consumer

The next generation mobile phone store

The multi-channel challenge

Fashion & technology

Convergence

The impact of convergence

European Consumer Context

Fixed-line telephones

Figure 2: Types of telephone owned - Germany, Spain, France and GB, 2006

Mobile phone ownership

Figure 3: Trends in ownership of mobile phones - Germany, Spain, France and GB, 2002-06

Mobile phone features

Features available

Figure 4: Have features - Germany, Spain, France and GB, 2006

Features used

Figure 5: Use features - Germany, Spain, France and GB, 2006

Percentage using features available

Figure 6: Percentage using features available - Germany, Spain, France and GB, 2006

Internal Market Environment

Number of connections

Figure 7: Total telecommunications connections, 2001-05

Figure 8: Breakdown of telecommunications connections, by type, 2001-05

Rely on mobile only?

Figure 9: Main method of making and receiving calls among UK adults, 2004 and 2005

Fixed-line telephones

Figure 10: Types of telephone and fax machine owned, 2002-06

Mobile phone ownership

Figure 11: Trends in ownership of mobile phones, 2000-06

Multiple ownership of mobile phones

Figure 12: People in the household owning a mobile phone, 2002-06

Type of mobile phone contract

Figure 13: Type of mobile phone contract used, 2002-06

How long with current mobile network

Figure 14: How long with current mobile network, 2002-06

Rising ownership of mobiles among children

Figure 15: Youth ownership of mobile phones, 2005 and 2006

Figure 16: Youth, ownership of mobile phones, who pays and type of contract, 2005 and 2006

Mobile phone features

Features available

Figure 17: Have features, 2004-06

Features used

Figure 18: Features used, 2004-06

Percentage using features available

Figure 19: Percentage using features available, 2004-06

Commoditisation

The social role of mobiles

3G drives content?

Convergence

A highly competed market

Manufacturers moving in?

Health issues

Free calls/texts

Complexity

Broader Market Environment

Population trends

Growing population

Figure 20: UK: Population trends, 2002-07

Immigration impact

But ageing too

Figure 21: UK: Population trends by age band, 2002-12

Household sizes getting smaller

Figure 22: UK: Percentage change of household size, 1996-2006

Population implications

Strong consumer confidence

Figure 23: PDI and consumer expenditure, at current and constant 2002 prices, 2002-12

But a more cautious consumer will emerge

Figure 24: PDI and consumer spend growth rates, at current and constant prices, 2002-07 and 2007-12

Market in Context

Consumer spending

Figure 25: UK: Consumer spending on communications, 2002-06

Figure 26: UK: Consumer price index (selected goods) and share of communications of all consumer spending, 2002-06

Figure 27: UK: Average weekly expenditure on telecoms of households, 2003/04-2005/06

Strengths and Weaknesses in the Market

Strengths

Weaknesses

Retail Sector Sales and Forecast

Key points

Future

Past

Outlook

Figure 28: UK: Retailers’ sales, 2002-12

Figure 29: UK: Other specialist retailers’ sales as share of all retailers sales, 2002-12

Past trends

Figure 30: UK: Retail sales of telecommunications equipment, 2002-06

Figure 31: UK: Retail sales of mobile telephones, number of enterprises, 2001-05

Market Size and Forecast

Key points

The mobile phone market

Figure 32: Mobile phone subscribers 2001-05 and UK retail sales of handsets, by volume, 2002-06

Figure 33: Index of UK sales of mobile phone handsets, by volume and value (current prices), 2002-06

Figure 34: Market size and forecast for mobile phone handsets, at current and constant 2007 prices, 2002-12

Factors incorporated in the forecast

Figure 35: UK: Fixed line subscribers, 2001-05

Figure 36: Sales of fixed line telephones and answering machines, by volume and value, 2003-06

Figure 37: UK sales of telephones and answering machines, by type, volume and value, 2005

Where and How They Buy Mobile Phones

Key findings

Where people buy mobile phones

Orange retains pole position

CPW up and Vodafone down

Other winners and losers

Gifting is a big market

Figure 38: Outlet where last mobile phone purchased, January 2006 and February 2007

Who buys where

Specialists

No pronounced gender bias

The young like T-Mobile, O2 and other specialists

Figure 39: Mobile phone specialists where last mobile phone purchased, by age, February 2007

Less affluent socio-economic bias at T-Mobile

Figure 40: Mobile phone specialists where last mobile phone purchased, by socio-economic group, February 2007

Figure 41: Mobile phone specialists where last mobile phone purchased, by gender, age and socio-economic group, February 2007

Pre-/no family lifestage is the most important

Figure 42: Mobile phone specialists where last mobile phone purchased, by lifestage, February 2007

O2 has a very clearly defined audience

Figure 43: Bought last mobile phone from O2, by special group, February 2007

Figure 44: Mobile phone specialist where last mobile phone purchased, by lifestage and Special Groups, February 2007

Non-specialists

Mobiles are a popular gift for women, teenagers and older people

Figure 45: Mobile phone received as a gift, by gender, age and socio-economic group, February 2007

Supermarkets have fairly broad appeal

Figure 46: Bought last mobile phone from supermarket, by gender, socio-economic group and lifestage, February 2007

But other retail outlets are biased to the young, families and urban prosperous

Figure 47: Bought last mobile phone from other retail outlet, by age, lifestage and ACORN category, February 2007

Who on earth doesn’t have a mobile?

Figure 48: Those that do not have a mobile phone, by age, socio-economic group and commercial TV viewing, February 2007

Figure 49: Non-specialists where last mobile phone purchased and those not having a mobile phone, by gender, age, lifestage, ACORN category and commercial TV viewing, February 2007

Channel used for last mobile phone purchased

Figure 50: Channel used for last mobile phone purchased, February 2007

Who buys from which channel

Figure 51: Channel used for last mobile phone purchased, by age, February 2007

Figure 52: Channel used for last mobile phone purchased, by gender, age, lifestage and Special Groups, February 2007

Figure 53: Channel used for last mobile phone purchased, by socio-economic group and working status, February 2007

Figure 54: Channel used for last mobile phone purchased, by socio-economic group and working status, February 2007

Figure 55: Channel used for last mobile phone purchased, by outlet used, February 2007

Where and How They Buy Mobile Phones - Detailed Consumer Demographics

Figure 56: Mobile phone specialist where last mobile phone purchased, by presence of children, working status, region, ACORN categories, technology usage, Internet usage, newspaper readership, commercial TV viewing and supermarket used, February 2007

Figure 57: Non-specialists where last mobile phone purchased and those not having a mobile phone, by presence of children, Special Groups, working status, region, technology usage, Internet usage, newspaper readership and supermarket used, February 2007

Figure 58: Channel used for last mobile phone purchased, by presence of children, region, ACORN categories, technology usage, Internet usage, newspaper readership and supermarket used, February 2007

Channels of Distribution

Fixed line equipment

Figure 92: Distribution of fixed line telecommunications equipment (phones, fax, answering machines), by channel, 2003-06(e)

Figure 93: Distribution of fixed line telecommunications equipment (phones, fax, answering machines), by channel, by value, 2003-06(e)

Mobile handsets

Figure 94: Distribution of mobile handset sales, by channel, 2000, 2002 and 2004-06(e)

Figure 95: Distribution of mobile handsets, by channel, by volume, 2000, 2002, 2004-06

Retail Competitor Analysis

Figure 96: UK: Leading telecommunications specialists, 2006

Channel used for last mobile phone purchased

Evaluation

Figure 97: Telecommunication specialists, evaluation, 2006/07

Retail Advertising and Promotion

UK advertising expenditure

Specialist mobile phone stores

Figure 98: Main media advertising spend, by leading specialist mobile phone stores, 2002-06

Figure 99: Share of main media advertising spend by leading specialist mobile phone stores by retailer, 2006

Figure 100: Share of main media advertising spend, by specialist mobile phone stores by media, 2006

Figure 101: Media advertising spend by leading specialist mobile phone stores by media, 2006

Non-specialists

Figure 102: Main media advertising spend, by leading non-specialist stores on advertising mobile phones, 2002-06

Figure 103: Main media advertising spend by leading non-specialist stores on advertising mobile phone, 2006

Figure 104: Media advertising spend by leading non-specialist stores on advertising mobile phone by media, 2006

Mobile phone manufacturers

Figure 105: Main media advertising spend by leading manufacturers on advertising mobile phones, 2002-06

Figure 106: Main media advertising spend, by leading manufacturers on advertising mobile phones, 2006

Retailer Profiles

3

Strategic evaluation

Background

Financial performance

Figure 117: 3: UK revenue split by type of customer, 2006

Store portfolio

Figure 118: 3: Interior

Retail offering

Market positioning

Brands

Product offer

Pricing

e-commerce & home shopping

Advertising

The Carphone Warehouse

Strategic evaluation

Network operators - friend or foe?

Diversification - a good move, but insignificant so far

Background

Financial performance

Figure 119: The Carphone Warehouse: Group turnover, 2001/02-2006/07

Figure 120: The Carphone Warehouse: Retail turnover, 2002/03-2006/07

Figure 121: The Carphone Warehouse: Distribution turnover, 2006

Figure 122: The Carphone Warehouse: Total group turnover by region, 2006

Store portfolio

Figure 123: The Carphone Warehouse: Interior

Figure 124: The Carphone Warehouse: Outlet data, 2002-07

Figure 125: The Carphone Warehouse: Outlet data, April 2007

Figure 126: The Carphone Warehouse: Store development, 2002-07

Retail offering

Market positioning

Product offer

Brands

Pricing

e-commerce & home shopping

Advertising

Orange UK

Strategic evaluation

Background

Orange quickly establishes itself in the market

Changes of ownership

Financial performance

Figure 127: Orange Retail Ltd: Group financial performance, 2001-05

Store portfolio

Figure 128: Orange Retail Ltd: Outlet data, 2001-05

Retail offering

Market positioning

Product offer

Operational issues

Advertising & marketing

e-commerce & home shopping

Phones 4U

Strategic evaluation

See what you can do without O2

A young image

Reliant on network operators

Background

Financial performance

Figure 129: Phones 4U: Financial performance, 2001-06

Store portfolio

Figure 130: Phones 4U: Interior

Retail offering

Market positioning

Brands

Product offer

Pricing

e-commerce & home shopping

Advertising

Telefonica O2 Europe

Strategic evaluation

Background

O2 begins life as part of BT

European operations

Mobile Virtual Networks

Telefonica acquires O2

Financial performance

Figure 131: O2 Plc: Mobile telecommunications turnover, country breakdown, 2003-05

Figure 132: O2 Plc: Revenue split by segment & country, 2003-05

Figure 133: O2 (Retail): Group financial performance, 2002-05

Store portfolio

Figure 134: O2 (Retail): UK outlet data, 2002-06

Retail offering

Market positioning

Product offer

Operational issues

Advertising & marketing

e-commerce & home shopping

T-Mobile UK

Strategic evaluation

Background

Financial performance

Figure 135: T-Mobile UK: Turnover, 2003-06

Store portfolio

Figure 136: T-Mobile UK: Store portfolio, 2002-06

Retail offering

Market positioning

Brands

Product offer

Pricing

e-commerce & home shopping

Advertising

Virgin Mobile

Strategic evaluation

Background

Financial performance and store portfolio

Stores

Vodafone Group

Strategic evaluation

Background

First mover advantage

Retail expansion

Mannesmann acquisition

Financial performance

Figure 137: Vodafone Distribution Limited (retail outlets): Group financial performance, 2001-05

Major European operations

The global and European context

Figure 138: Vodafone Plc: Selected financial data from major European markets, 2006

Figure 139: Vodafone Plc: Average monthly ARPU, 2006

Vodafone Italy

Vodafone Spain

Vodafone Germany

Store portfolio

Figure 140: Vodafone Distribution Limited (retail outlets): Outlet data, 2001-06

Vodafone Connectivity Centres

MVNO deal with Asda

Retail offering

Market positioning

Product offer

Operational issues

Advertising & marketing

e-commerce & home shopping