Rethinking handset subsidies
Rethinking handset subsidies - What role do handsets play in telcos' strategies and in the value chain's evolution?
This report looks at how operators are grappling with the issue of handset subsidies
After providing a reminder of the main reasons these subsidies exist, we analyse how operators – now facing growing competition and a changing value chain – have redefined the role that handsets play in their strategies.
We will see how a paradigm shift has occurred in a matter of years, and how the status quo might evolve over the long term
- 1. Executive Summary
- 2. Methodology
- 3. Why subsidise?
- 3.1. The device as consumption facilitator
- 3.2. Supporting network development
- 3.3. Subsidies, commitment and retention
- 4. A changing environment
- 4.1. The smartphone: an increasingly heavy burden for operators
- 4.2. The rise of no-contract plans
- 4.3. Supplier emancipation + the rise of OTT = the end of walled gardens
- 5. Player strategies in a whole new world: what are the alternatives?
- 5.1. Changing subsidy strategies
- 5.1.1. Lengthening contractual periods
- 5.1.2. Decreasing the size of subsidies
- 5.1.3. Resetting priorities: churn, retention and super buyers
- 5.2. Development of financing offers
- 5.2.1. Different types of loan
- 5.2.2. Handset leasing: the rise of "Device as a Service"
- 5.2.3. Offering special rates on plans rather than subsidising the handset
- 5.2.4. Case study: the United States
- 5.3. New challenges for handset suppliers
- 5.3.1. Impacting high-end products
- 5.3.2. New (local) players emerging
- 5.3.3. Revamping operator brand phones
- 5.3.4. What impact will 5G have on subsidies?
- Tables and Figures
- Table 1: Regulatory status of SIM card locking in a selection of European countries
- Table 2: Bouygues Telecom subsidies, as of December 2015
- Table 3: Christmas 2015 specials from operators in France, by order of campaign dates
- Figure 1: Comparison of subsidies vs. mobile service revenue for a selection of operators
- Figure 2: Evolution of the value chain
- Figure 3: Adoption rates for no-contract mobile plans in in France
- Figure 4: China Mobile: maturing 4G handsets and a change in subsidies
- Figure 5: Sprint: adapting financing to the customer's credit rating
- Figure 6: Example of a leasing structure with outsourced leasing contract management
- Figure 7: Cost of an iPhone 6s Plus with T-Mobile USA
- Figure 8: Cost of an iPhone 6s with T-Mobile's JUMP! On Demand scheme
- Figure 9: AT&T Next adoption rate and progress of handset revenue's share of total postpaid ARPU
- Figure 10: Comparison of supply costs: ODM vs. OEM
- Figure 11: Terminal small cells according to Chinese manufacturer Coolpad