SIM-Only Emerges From the Shadows
SIM-Only Emerges From the Shadows
11th June , 2009
Europe : SIM-only tariffs have always been present. However, in many developed markets it is only recently that they have emerged from the shadows of the traditional prepaid and post-paid tariffs. While the recession has fuelled the SIM-only agenda, the trend is not just a fad and will most likely outlast the economic downturn.
This article is a piece of research written by Raymond Yu, analyst at Ovum www.ovum.com.
Although there are many benefits from offering SIM-only plans, operators should understand that they can equally be a double-edged sword. SIM-only offerings are spreading SIM-only offerings are not a new phenomenon.
In emerging markets and prepaid-dominated markets, the SIM-only model has always been the standard mobile offering. In these markets customers purchase a SIM and a standalone handset separately and subsidies are generally low or non-existent. However, the role of SIM-only is now penetrating developed mobile markets that have been traditionally accustomed to high levels of handset subsidies.
Our recent research report SIM-only emerges from the shadows analyses the current surge in SIM-only offerings and highlights the lessons to learn for operators looking to realise the opportunity of SIM-only in their own market. It shows that SIM-only offerings are part of an evolving tariff environment that can be grouped into six different manifestations of mobile subscriptions: pay as you go; prepaid hybrid; prepaid bundles; post-paid SIM-only over 30 days; post-paid SIM-only over 12/18/24 months; and post-paid bundles. SIM-only offerings are a double-edged sword For MNOs, SIM-only presents a powerful tool. If employed effectively it could stabilise revenues, cut costs (especially subscriber acquisition costs) and retain customers.
To succeed with SIM-only, adaptation is imperative. Many factors impact the acceptance of SIM-only offerings, including the prepaid and post-paid split of the market, market penetration, MNO positioning and strategic motives, the level of handset subsidies, contract terms and many others. MNOs must design their SIM-only offerings to work in their own market. Our research shows that each market generally has its own version of SIM-only. In the UK, the latest trend is for SIM-only plans with a 30-day notice period. In the Netherlands post-paid SIM-only with 12-, 18- or 24-month contract terms have been common for many years, and similar post-paid offerings are now also growing in France.
SIM-only deals can often be considered as an easy route to aid growth, but MNOs need to take a big-picture view - focusing on building loyalty is just as important as increasing connections. Crucially, MNOs need to adopt a 'carrot and stick' approach to mitigate the churn risk. MNOs should endeavour to woo their SIM-only customers, especially those on short-term contracts, in the hope of committing them to longer terms. SIM-only is here to stay