Friday, 6 June 2008

Time to face up to a UK recession

As the UK seems to be on the brink of a recession, surely it's time for network operators to take a long hard look at how they'll adapt. Why? Because if they don't they may not survive. If revenue falls substantially, consolidation is inevitable.

I've heard a few people claim that mobile is recession-proof. In my opinion no consumer product or service is entirely recession proof. Admittedly few people will give up their mobiles altogether, but usage may change, most notably by users being unwilling to stump up cash for handsets or sign up to contracts. Prepay is probably recession-proof, contract ain't.

The handset market is particularly vulnerable: expensive consumer electronics is one of the first costs to be dumped when the belts are being tightened. Admittedly most people don't currently pay for handsets, but with a dwindling interest in signing up for new contracts, the number of bundled handsets will fall. In fact, contract and handset sales have been declining for months.

So, what do MNOs need to do to head off the risk?
  1. Beef up your prepay options. Prepay will be a big battleground. Headline price doesn't matter so much. People think of prepay like they think of filling up their car with petrol. They don't think of the per-min price. In fact most don't even know what price they're paying. What they are aware of is special offers, e.g. top up £10 and get free calls at the weekend. These sell. Low per-min rates don't really. So focus on hot special offers such as these.
  2. Push SIM-only, it'll be huge. Actually, it's already huge. People will swap out their handsets less frequently, but that doesn't mean they won't change provider, particularly with faster number porting.
  3. Focus on own-channels. Big opportunity here to cut out the third party channels. Deal seekers will come into store or use the web. They'll chase the deals, so there's no need to throw money at a middleman.
  4. Do not throw handset subsidies at prepay users. How many times do you need to be told. If you sell prepay handsets at massive subsidies, you'll get box-breaking. Then you'll haemmorhage cash. End of story.
  5. Look at more flexible contract offers. Rolling contracts, for example, should be investigated more closely. People don't want to tie themselves down, so don't make them. This applies equally to mobile broadband, where operators can steal a march on fixed BB suppliers with more flexible contract terms.
  6. Forget the multimedi services. These are far from being essentials (unlike voice and text) so don't focus on them. Push cheap voice and text.

In conclusion, mobile voice and SMS are probably recession-proof, but the way people pay for them isn't.

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