Implications of Device Financing Plans and Lack of Handset Subsidies for Operator Profitability in Europe

Powered by

All the vital news, analysis, and commentary curated by our industry experts.

$1195

Operator profitability in the mobile segment in Europe is under pressure, particularly in more mature markets where expensive handsets are often subsidized in order to drive growth in high ARPU postpaid segments. In retracting device subsidy offers, operators have the potential to ease this financial pressure and lower the cost per customer acquisition, as discussed in Section 1. Such strategic shifts can merit rewards but are never risk-free. Section 2 contains specific European case studies (Germany, Netherlands, the United Kingdom and Bulgaria) where other device financing models have been adopted, in addition to the four operators in the US, with particular focus on financial performance. Section 3 focuses on the key factors that operators must take into account when adopting such models (e.g., regulations or consumer purchasing power) before a summary of key findings and recommendations is provided.

This report, 'Implications of Device Financing Plans and Lack of Handset Subsidies for Operator Profitability in Europe', part of the GlobalData series of Telecom Insider Reports for Europe, examines in detail the dynamics of the mobile devices market in terms of operator handset financing. Specifically, it includes analysis of strategic drivers and implications for operators that have moved away from the widely adopted handset subsidization model, instead looking to alternative methods such as equipment installment plans (EIPs) and leasing.

T-Mobile pioneered the EIP in the US telecom market via its Jump! Plan in 2013, as part of its ‘Un-carrier’ strategy to simplify and disrupt the consumer market. Since then, competitors AT&T, Verizon and Sprint have followed suit and now offer non-subsidized device financing plans. This report assesses the potential for similar levels of adoption in European markets.

Scope

– Subsidized handsets and lengthy contracts have been a common offering from many operators to support mobile subscriptions growth.

– Pressures on operator profitability in the mobile market may prompt European operators to adopt alternate, non-subsidized device financing models, if they haven’t already.

– If executed well, withdrawal of handset subsidies and adoption of new financing models can have a positive impact on operator profitability, while offering consumers greater transparency and flexibility.

– Strategic shifts concerning handset financing can have a negative impact on telcos if conditions are not right, as various case studies show. – Constraints on SIM-locking, MNP and contract duration limits are factors for operators to consider when determining successful handset financing strategies.

Reasons to Buy

– This report examines the dynamics of the mobile devices market in Europe in terms of operator handset financing, providing stakeholders with an in depth view of the market and competitive landscape. Detailed analysis of diverse handset financing models (eg. subsidization, equipment instalment plans and leasing) and the implications for operators that have moved away from the widely adopted handset subsidization model, is invaluable when planning and aligning product offerings moving forwards. This report discusses the recent strategic move to non-subsidized financing plans in the USA and assesses the potential for similar levels of adoption in European markets.

– Helps executives build proactive, profitable growth strategies by offering comprehensive and relevant analysis of handset financing strategies in the European region, regulatory framework, competitive environment and operator best practises.

– The case studies, which give detailed analysis of the effects that alternative handset financing strategies have had on reported operator financial performance, focus on key European markets (Germany, Netherlands, UK, and Bulgaria) as well as the USA and can be beneficial to both local players and prospective market entrants.

– By understanding the interests and positions of key operators in the smartphones market, telecom professionals/operators can develop strategies and increase their market participation.

Everything Everywhere
T-Mobile Poland
Orange France
Carphone Warehouse
Telefonica Deutschland
KPN Netherlands
O2 UK
Telenor Bulgaria
Verizon
AT&T
T-Mobile USA
Sprint

Table of Contents

Introduction

Section 1: Market Landscape

The subsidized handset model – drivers for operator adoption

Examples of operator handset subsidy models in Europe

Rationale for operators adopting alternative device financing models

Europe mobile market overview

Section 2: Case Studies

O2 My Handy (Germany)

KPN EIPs / Leasing

O2 Refresh (United Kingdom)

Telenor Lease (Bulgaria)

Synopsis of handset financing dynamics in the United States

Verizon Device Payments

AT&T Next

T-Mobile Jump! / Jump! On Demand

Sprint Lease

Section 3: Key Findings & Recommendations

Key considerations for operators when determining handset financing strategy

Overview of handset financing model types

Summary of key findings and recommendations

Appendix

About the authors

Contact information

Table

Exhibit 1: The optimum time for operators to employ handset subsidy models

Exhibit 2: T-Mobile Poland iPhone 7 (32GB) postpaid pricing

Exhibit 3: Orange France iPhone 7 (32GB) postpaid pricing

Exhibit 4: Carphone Warehouse UK prepaid/SIM-free pricing

Exhibit 5: Year-on-year smartphone sales growth (%)

Exhibit 6: WE mobile revenue mix (%)

Exhibit 7: Postpaid penetration of total subs (%)

Exhibit 8: O2 My Handy EIP with no mobile service plan

Exhibit 9: O2 My handy handset/airtime bundle

Exhibit 10: O2 Germany total revenue year-on-year growth (%)

Exhibit 11: O2 Germany total OIBDA margin (%) trends

Exhibit 12: Subscriptions Penetration of population in German market (%)

Exhibit 13: KPN EIP with KPN Complete

Exhibit 14: KPN consumer mobile revenue year-onyear growth (%)

Exhibit 15: KPN consumer mobile EBITDA margin (%)

Exhibit 16: Operator mobile subscriptions share, Netherlands (%)

Exhibit 17: O2 Refresh decouples the handset and airtime plans

Exhibit 18: O2 Refresh as part of O2’s ‘Be More Dog’ marketing campaign

Exhibit 19: O2 UK mobile revenue by contributing factor (€bn)

Exhibit 20: O2 UK mobile revenue year-on-year growth (%)

Exhibit 21: Operator mobile subscriptions share, UK (%)

Exhibit 22: Mobile Data User Penetration of POP

Exhibit 23: Telenor Bulgaria device financing

Exhibit 24: Telenor Bulgaria total* revenue (NOK bn)

Exhibit 25: Telenor Bulgaria total EBITDA margin (%)

Exhibit 26: Operator mobile subscriptions share, Bulgaria

Exhibit 27: Vivacom Bulgaria smartphone FinancingExhibit 28: Verizon Wireless revenue year-on-year growth (%)

Exhibit 29: Verizon Wireless EBITDA margins (%)

Exhibit 30: AT&T Mobility operating revenue mix

Exhibit 31: AT&T Mobility operating revenue growth

Exhibit 32: T-Mobile operating metrics ($bn)

Exhibit 33: T-Mobile revenue growth trends (%)

Exhibit 34: Sprint mobile churn trends*

Exhibit 35: Sprint mobile postpaid sales by plan*

Exhibit 36: Slovakia mobile operator market sharedynamics (%)

Exhibit 37: Spain mobile operator market shares dynamics (%)

Figures

Exhibit 1: The optimum time for operators to employ handset subsidy models

Exhibit 2: T-Mobile Poland iPhone 7 (32GB) postpaid pricing

Exhibit 3: Orange France iPhone 7 (32GB) postpaid pricing

Exhibit 4: Carphone Warehouse UK prepaid/SIM-free pricing

Exhibit 5: Year-on-year smartphone sales growth (%)

Exhibit 6: WE mobile revenue mix (%)

Exhibit 7: Postpaid penetration of total subs (%)

Exhibit 8: O2 My Handy EIP with no mobile service plan

Exhibit 9: O2 My handy handset/airtime bundle

Exhibit 10: O2 Germany total revenue year-on-year growth (%)

Exhibit 11: O2 Germany total OIBDA margin (%) trends

Exhibit 12: Subscriptions Penetration of population in German market (%)

Exhibit 13: KPN EIP with KPN Complete

Exhibit 14: KPN consumer mobile revenue year-onyear growth (%)

Exhibit 15: KPN consumer mobile EBITDA margin (%)

Exhibit 16: Operator mobile subscriptions share, Netherlands (%)

Exhibit 17: O2 Refresh decouples the handset and airtime plans

Exhibit 18: O2 Refresh as part of O2’s ‘Be More Dog’ marketing campaign

Exhibit 19: O2 UK mobile revenue by contributing factor (€bn)

Exhibit 20: O2 UK mobile revenue year-on-year growth (%)

Exhibit 21: Operator mobile subscriptions share, UK (%)

Exhibit 22: Mobile Data User Penetration of POP

Exhibit 23: Telenor Bulgaria device financing

Exhibit 24: Telenor Bulgaria total* revenue (NOK bn)

Exhibit 25: Telenor Bulgaria total EBITDA margin (%)

Exhibit 26: Operator mobile subscriptions share, Bulgaria

Exhibit 27: Vivacom Bulgaria smartphone FinancingExhibit 28: Verizon Wireless revenue year-on-year growth (%)

Exhibit 29: Verizon Wireless EBITDA margins (%)

Exhibit 30: AT&T Mobility operating revenue mix

Exhibit 31: AT&T Mobility operating revenue growth

Exhibit 32: T-Mobile operating metrics ($bn)

Exhibit 33: T-Mobile revenue growth trends (%)

Exhibit 34: Sprint mobile churn trends*

Exhibit 35: Sprint mobile postpaid sales by plan*

Exhibit 36: Slovakia mobile operator market sharedynamics (%)

Exhibit 37: Spain mobile operator market shares dynamics (%)

Frequently asked questions

Implications of Device Financing Plans and Lack of Handset Subsidies for Operator Profitability in Europe standard reports
Currency USD
$1,195

Can be used by individual purchaser only

$3,585

Can be shared globally by unlimited users within the purchasing corporation e.g. all employees of a single company


Undecided about purchasing this report?

Enquire Before Buying

Get in touch to find out about multi-purchase discounts

reportstore@globaldata.com
Tel +44 20 7947 2745

Every customer’s requirement is unique. With over 220,000 construction projects tracked, we can create a tailored dataset for you based on the types of projects you are looking for. Please get in touch with your specific requirements and we can send you a quote.

See what our customers are saying

“The GlobalData platform is our go-to tool for intelligence services. GlobalData provides an easy way to access comprehensive intelligence data around multiple sectors, which essentially makes it a one-for-all intelligence platform, for tendering and approaching customers.

GlobalData is very customer orientated, with a high degree of personalised services, which benefits everyday use. The highly detailed project intelligence and forecast reports can be utilised across multiple departments and workflow scopes, from operational to strategic level, and often support strategic decisions. GlobalData Analytics and visualisation solutions has contributed positively when preparing management presentations and strategic papers.”

Business Intelligence & Marketing Manager, SAL Heavy Lift

“COVID-19 has caused significant interference to our business and the COVID-19 intelligence from GlobalData has helped us reach better decisions around strategy. These two highlights have helped enormously to understand the projections into the future concerning our business units, we also utilise the project database to source new projects for Liebherr-Werk to use as an additional source to pitch for new business.”

Market Analyst & Management, Liebherr-Werk

Your daily news has saved me a lot of time and keeps me up-to-date with what is happening in the market, I like that you almost always have a link to the source origin. We also use your market data in our Strategic Business Process to support our business decisions. By having everything in one place on the Intelligence Center it has saved me a lot of time versus looking on different sources, the alert function also helps with this.

Head of Key Accounts, Saab AB

Having used several other market research companies, I find that GlobalData manages to provide that ‘difficult-to-get’ market data that others can’t, as well as very diverse and complete consumer surveys.

Marketing Intelligence Manager, Portugal Foods

Our experience with GlobalData has been very good, from the platform itself to the people. I find that the analysts and the account team have a high level of customer focus and responsiveness and therefore I can always rely on. The platform is more holistic than other providers. It is convenient and almost like a one stop shop. The pricing suite is highly competitive and value for our organisation.

I like reports that inform new segments such as the analysis on generation Z, millennials, the impact of COVID 19 to our banking customers and their new channel habits. Secondly the specialist insight on affluent sector significantly increases our understanding about this group of customers. The combination of those give us depth and breadth of the evolving market.

I’m in the business of answering and helping people make decisions so with the intelligence center I can do that, effectively and efficiently. I can share quickly key insights that answer and satisfy our country stakeholders by giving them many quality studies and primary research about competitive landscape beyond the outlook of our bank. It helps me be seen as an advisory partner and that makes a big difference. A big benefit of our subscription is that no one holds the whole data and because it allows so many people, so many different parts of our organisation have access, it enables all teams to have the same level of knowledge and decision support.

Head of Customer Insight and Research, Standard Chartered

“I know that I can always rely on Globaldata’s work when I’m searching for the right consumer and market insights. I use Globaldata insights to understand the changing market & consumer landscape and help create better taste & wellbeing solutions for our customers in food, beverage and healthcare industries.

Globaldata has the right data and the reports are of very high quality compared to your competitors. Globaldata not only has overall market sizes & consumer insights on food & beverages but also provides insights at the ingredient & flavour level. That is key for B2B companies like Givaudan. This way we understand our customers’ business and also gain insight to our unique industry”

Head of Consumer Sensory Insights, Givaudan

GlobalData provides a great range of information and reports on various sectors that is highly relevant, timely, easy to access and utilise.  The reports and data dashboards help engagement with clients; they provide valuable industry and market insights that can enrich client conversations and can help in the shaping of value propositions. Moreover, using GlobalData products has helped increase my knowledge of the finance sector, the players within it, and the general threats and opportunities.

I find the consumer surveys that are carried out to be extremely beneficial and not something I have seen anywhere else. They provided an insightful view of why and which consumers take (or don’t) particular financial products. This can help shape conversations with clients to ensure they make the right strategic decisions for their business.

One of the challenges I have found is that data in the payments space is often piecemeal. With GD all of the data I need is in one place, but it also comes with additional market reports that provide useful extra context and information. Having the ability to set-up alerts on relevant movements in the industry, be it competitors or customers, and have them emailed directly to me, ensures I get early sight of industry activity and don’t have to search for news.

Senior Account Manager, TSYS
Go even deeper with GlobalData Intelligence Center

Every Company Report we produce is powered by the GlobalData Intelligence Center.

Subscribing to our intelligence platform means you can monitor developments at Implications of Device Financing Plans and Lack of Handset Subsidies for Operator Profitability in Europe in real time.

  • Access a live Implications of Device Financing Plans and Lack of Handset Subsidies for Operator Profitability in Europe dashboard for 12 months, with up-to-the-minute insights.
  • Fuel your decision making with real-time deal coverage and media activity.
  • Turn insights on financials, deals, products and pipelines into powerful agents of commercial advantage.