uSwitch reports more people appreciating the freedom of SIM-only contracts

Visitors to this site, my social media followers and anyone on the various forums I contribute to will know I’ve been an advocate of more affordable phones for some time, along with the many benefits that going down the SIM-only route can bring.

Quite recently Simon Rockman contributed a guest editorial highlighting key reasons why people are slowing down their upgrade cycle, and it’s pretty clear to see from other research that people are keeping their handsets for longer.

This week uSwitch, the price comparison website, has released a whitepaper that carried out a great deal of research to dig deeper into what people are looking for from a contract – as well as the growth of SIM only contracts. (Seems a lot of you were taking my advice then!)

I caught up with Ernest Doku, mobiles expert at uSwitch to hear a bit more about the data, and discuss how the company can further improve the price comparison side of the business to help consumers make more informed buying decisions.

No longer a two-horse race

For a while it seemed that it had all come down to Samsung and Apple launching flagship devices every year, and the public flocking to pre-order and sign up on a pricey 24-month contract, often with a hefty up-front fee too.

While that’s no doubt still true for many (think recent iPhone 8 launch), things have changed a fair bit as more companies have entered, or re-entered the market, such as Huawei/Honor, Wileyfox, OnePlus, Lenovo, Alcatel, Nokia etc, alongside the long-established companies like LG, HTC, Motorola and Sony. It all brings a great deal of choice, and a much wider range of pricing to suit all budgets and needs.

In addition to the choice of handsets, there has perhaps never been as much choice when it comes to pay monthly and pay as you go plans, as well as more and more virtual network operators entering the market.

According to research, consumers no longer feel they have to commit to a 24-month contract, or pay in excess of £40 a month. Likewise, high street retailers will continue to feel the pinch as customers no longer accept their deals as necessarily being the best available.

As I’ve said for some time, we’ve perhaps never had it so good.

uSwitch makes it easy to search out SIM only deals
uSwitch makes it easy to search out SIM only deals
A SIM-only future?

uSwitch has found that in the last two years, there has been an explosion of SIM only contracts, aided in particular by virtual network operators keen to expand.

15% of contract customers plan to change to a SIM-only deal at the end of their current contract, adding to the existing 30% of the market already on them. SIM-only is particularly important to adults and the retired, while 18-34 year olds remain more likely to take a handset plan to save on the upfront cost of a new phone.

Three quarters of those that do go with a SIM-only plan are also likely to go on a 30-day plan for the added flexibility, even if there’s no immediate desire to leave their current network.

When choosing a plan, mobile data is the key consideration and features as the top search criteria on the price comparison site. Well above searches for voice minutes or text bundles.

Handset plans aren’t dead – yet

For those yet to consider SIM-only, handset plans are by no means obsolete – even if they will continue to fall as time goes on.

The primary reason for staying on a handset plan is quite obvious; to get a new phone when the current contract ‘ends’. And at the end of the minimum term, there’s an obvious incentive to sign up with another new phone and continue as before. Switching provider is still considered a hassle for a lot of users, which perhaps plays into the hands of operators and prevents the best deals being offered.

This is something that can change through education, and taking the time to search out better deals from more than your current network.

Customers upgrading generally want a larger bundle for less money, or to keep what they have but with a discount. Something that can be hard to do as newer devices continue to go up in price year-on-year.

As time goes on, less people are expected to upgrade at the end of their term and seek instead to get a cheaper plan and keep what they have, especially as there’s an increasing perception that newer phones are not really bringing significant improvements.

Indeed, from those surveyed, the number one most important feature of a new phone was price, followed in second place by battery life. Pricing is generally going up, unless you look towards the newer entrants into the market, and battery life seems to be a feature that the biggest manufacturers are still not taking seriously enough – favouring ever thinner phones over bigger batteries.

Technological advancements can of course make handsets last longer with the same size battery (or even slightly smaller) but few seem to be considering getting the best of both worlds, by increasing the battery size and reducing power consumption.

Honor 8 Pro: Huge battery and top specs for 'budget' money
Honor 8 Pro: Huge battery and top specs for ‘budget’ money

To get the real battery gains, you often have little choice but to look towards the more mid to low-range handsets. Manufacturers like Honor, Lenovo and Motorola pride themselves on offering devices with large capacity batteries on some of their models.

Foot in the door

Since the days of the independent dealer in the 1990s to the high-street chains and networks selling on the high-streets today, the newer handset markets are increasingly finding it easier to bypass the chains and find new avenues to market, as well as finding more cost effective ways to market themselves.

Companies like Wileyfox and Honor that have each utilised social media with excellent results, and either sell directly from their own sites, or use the likes of Amazons and other e-tailers to sell SIM-free phones without fuss, and doing away with the issues of managing their inventory when offering multiple colour choices and configurations.

Virtual operators like Giffgaff have also made use of social media to promote its mobile plans, and recently both Three and Vodafone have entered the market with their own spin-off networks, Smarty and Voxi, respectively.

EE meanwhile has Plusnet as a route to market for the more price-conscious user, and then there are Tesco and other supermarkets with their own offerings, along with the likes of TalkTalk, Sky and more.

Many consumers won’t be aware of what network a lot of these virtual operators actually use, which can make a big difference to the quality of service, and this is something that the likes of uSwitch can help with.

What’s the ‘X-factor’ for a new plan?

For some time, mobile operators have relied on perks to entice customers to their plans over that offered by someone else. O2 offers early access to tickets, EE has BT Sport, Vodafone has a range of entertainment bundles, and Three offered roaming beyond Europe at no extra cost and more recently the GoBinge deal that gives zero-rated data access to a selection of streaming music and video services.

uSwitch however found little evidence that these are of primary concern to customers. Nor are customers that bothered about value-add strategies to encourage loyalty, such as having your mobile, home phone and broadband all with the same company.

With over 100 virtual networks (MVNOs) in the UK, and a combined market share of 15%, these are the people that are a risk to the ‘big boys’, and perhaps explains why the main networks have invested in their own MVNO offerings to effectively compete with themselves.

One reason to consider a virtual operator is simple: cost. Take a 30 day contract on O2 over Giffgaff and you may pay the same, or even more, for less data. uSwitch found that looking at various plans, you could often be looking at a pricing range of £12-25 per month on an MVNO, compared to £15-40 with any of the main network the MVNO piggybacks onto.

People are also demanding more data, perhaps through a genuine need for more data (perhaps to stream high-definition video to their new handset with a 2K or 4K screen), or just as a peace of mind measure to avoid hitting a hard data cap, or risking hefty run-on charges.

Will you buy your next phone from a store or online?
Will you buy your next phone from a store or online?
So what happens next?

uSwitch reports over 2,500 mobile retail stores trading in the UK now, but expects this number to drop. Apple may be able to keep its own retail stores going, but even the likes of Sony and Samsung have had little success replicating the idea with their own flagship stores.

Carphone Warehouse is already preparing for this with more phones being sold SIM-free online than are available in its stores on contract. Manufacturers are also offering interest-free deals to buy a SIM-free phone direct, potentially saving customers a large amount of money if they were otherwise going to use a credit card.

In addition, there are now finance deals that offer an upgrade path after just one year with the current phone taken back and used as a deposit, depending on its condition. Networks continue to extend the contract by a further two years each time you upgrade, which may be nice and easy for the customer but does risk you having the least amount of options, and a high risk of not being given any special deals that SIM only customers can take advantage of.

Tariffs are sure to adapt, some in good ways and some less so. I have my personal concerns about the loss of net neutrality if networks start to offer bundles that control Internet access, starting with the free stuff to get customers on side, but potentially moving on to the need to pay to access other content.

Other ideas, according to uSwitch, could copy the way other networks around the world do things, like offering unlimited data but with heavily controlled speed limits (speed capping) depending on your monthly payment, or shared plans where you buy a bundle of data and can ‘gift’ it to other members of your family, or work colleagues.

EE is in the process of launching a similar offer here to ‘gift’ part of your data allowance to another family member (or anyone on the same account) but has thus far had a few technical issues to sort out.

No doubt other ideas will be tested, such as Three’s Smarty MVNO offer of discounts on your next monthly payment if you don’t use up all of your data – an interesting alternative to rolling over unused data as some other MVNOs offer.

All reasons why it’s so important to do a proper search for what’s on offer before doing anything rash.

Contract or no contract?
Contract or no contract?
Prepay. Here to stay?

The future of prepay is also likely to change, as more people opt for 30-day SIM-only contracts to get better value for money and sometimes gain access to services not available on prepay at all.

Keeping customers loyal is going to be a real challenge to networks, and each must look at ways of encouraging users to stay when they have no lengthy contract to be tied in by.

Ideas could include loyalty discounts for customers staying with their network, or boosted data allowances. Perhaps even faster data speeds. But the latter also brings into question the whole net neutrality thing again.

In conclusion, uSwitch believes the consumer has more choices than ever before. We can all still get a new phone on a two-year contract, or do a bit more research and buy a phone outright to get the freedom to shop around for far better offers, and the ability to jump ship possibly with just 30 days notice if a better deal comes along.

Services like uSwitch aim to make such searching as easy as possible, but I did raise a few concerns that going down the SIM-free handset route can now have a few issues that aren’t necessarily widely known.

With the advent of 4G, the lack of voice over 4G from the outset caused major issues for the mobile industry. 4G coverage limited to within the footprint of 2G and 3G coverage, and more recently the launch of voice over 4G that requires handset support and individual network settings that can be missing on ‘generic’ SIM-free models.

Users on EE and Three are most affected by this, with the lack of VoLTE support meaning no access to a sizeable amount of coverage provided by 800MHz 4G sites (that cover wider areas and offer better indoor coverage).

Wi-Fi calling is another feature that can bring major benefits, but may not be supported by all phones.

In the future, I hope uSwitch will find a way to include information on these things to further improve the search process, but in the meantime you can still use the site to research options and narrow down lists, then come to sites like mine (or the many mobile forums – including Xda-developers) to fill in any last blanks.

More info:

Disclosure: I met with uSwitch to discuss their findings on the growth of SIM-only plans and predictions for the future. This is not a sponsored post, nor do I earn any commission on any sales made via the links above. In previous years I have judged at the uSwitch mobile awards, which was also unpaid.

4 thoughts on “uSwitch reports more people appreciating the freedom of SIM-only contracts

  1. Nothing I can add to an excellent, relevant piece of journalism and also mentioning the possible sim free phone pitfalls in certain circumstances. Top stuff.

  2. The biggest issue with sim only is you are paying for a part of a network that you cannot use. On 3 you cannot use their supervoice network if you are sim only. This would not be such an issue if they were rolling out 1800 4g on all sites, but where i live 4 out of the 5 sites only have 800mhz 4g. Therefore anyone with a unbranded handset are not getting 4g in this location. Until downloading the update for volte to unbranded hansets os sorted then the customer experience on these networks is just going to get worse and worse. Personally i am getting a bit fed up of paying for a third of a network that i cannot use.

    1. I did mention this and some phones do have support, like phones from Honor (but not having to be purchased from Three) and likewise for EE. There are then ways to change the firmware, which may be not be favoured by those worried about bricking their device. This is a process that’s easier on some handsets than others, and may also require PC access that not everyone has.

    2. Being on Three as my main ‘driver’ you do get a lot of bang for your buck on sim only deals which compensates me for the fact that I cannot talk and text at home now due EE upgrading their Orange masts thus killing the old roaming arrangement, Three in touch uses my rural WiFi quite well 😊


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