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Still clinging on. Photo by Anders via Wikimedia Commons

Feature phones may be on the way out, but not just yet

Posted By TelecomTV One , 28 March 2012 | 0 Comments | (0)
Tags: Smartphones Devices mobile data Research telcos business models handsets

Research from the UK suggests that the conversion from feature phones to smartphones isn’t as strong as expected, as European operators start to limit smartphone sales subsidies. Guy Daniels reports

Latest research from YouGov’s Technology and Telecoms team reveals what we all suspect – that feature phone ownership is on the wane. According to its latest quarterly study of UK mobile trends, 42 per cent of feature phone owners plan to get a smartphone next time they replace their handset. So far so good, but the same study shows that this planned conversion rate was only 6 per cent higher than when the survey was conducted a year ago.


According to YouGov Associate Director Russell Feldman, the slow speed of this conversion is an indication that smartphone manufacturers and retailers need to do more in order to shift perception and remedy concerns about rejection amongst feature phone owners:


“There is certainly an opportunity for feature phone owners to take advantage of several low-end smartphones currently on the market. Manufacturers such as HTC and Samsung, as well as OEM handsets, are successful at attracting low-end smartphone users and could potentially help convert feature phone users – especially as there is an increase of PAYG in the smartphone market.”


So why aren’t more feature phone owners upgrading to smartphones? The study suggests that 55 per cent are ‘happy with their regular mobile phone’, 47 per cent ‘have no need for a smartphone’, 32 per cent say ‘smartphones are too expensive’ and 30 per cent say ‘tariffs are too expensive’ (30%).

Complexity is only a concern of 16 per cent of respondents.


Feldman adds that a ‘one size fits all’ approach does not work for feature phone conversions, and mobile retailers’ customer service needs to be tailored to suit the requirements of individual customer.


“The groups that are rejecting smartphones do not usually find empathetic sales staff in the retailers they frequent. This is a matter of salesforce training for operators and retailers.”


Meanwhile, Wireless Intelligence reports that European operators are looking to cut smartphone subsidies to preserve data gains, which won’t do anything to help feature phone conversions.


The research unit of the GSMA operators’ association says that stabilising prices mean that data revenues are beginning to offset voice revenue declines in certain European countries, but the cost of attracting new mobile internet subscribers and keeping hold of existing ones continues to eat into operator profits. As a result, operators in mature markets are looking to reduce the high level of subsidies they currently offer to new and upgrading smartphone customers.


In Spain, where the level of mobile churn is second only to the UK in Western Europe, number-two player Vodafone this month announced that it was ending the practice of subsidising smartphones for new customers. It will instead offer free finance programmes for the purchase of new handsets and introduce a scheme to buy back old phones from upgrading customers.


According to Wireless Intelligence analyst Calum Dewar:


“We have already seen this type of pay-by-instalment smartphone purchase model employed in France with the recently-launched Free Mobile, and can expect other operators across Europe to follow suit as they too attempt to prevent acquisition and retention costs spiralling out of control.”


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