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New research suggests that mobile consumers in Western Europe are displaying less loyalty than those in North America by spreading their mobile connections across multiple operators. The new study, commissioned by Wireless Intelligence, aims to identify the impact that multiple mobile connections per user is having on customer loyalty patterns (a mobile connection is defined as either a SIM card or a unique mobile phone number in markets where SIM cards are not used).

More than two thirds of users with multiple mobile connections in the US and Canada remained loyal to a single mobile operator, while less than 40 percent of consumers in the ‘big five’ European markets (UK, France, Germany, Italy and Spain) were likely to keep all their mobile connections with one operator.

The least ‘loyal’ market in the study was Italy – a market where the vast majority of consumers maintain more than one mobile connection (around 1.77 SIM cards per user). According to the study, 81 percent of Italians spread their mobile connections across different network providers with only 19 percent remaining loyal. This trend is magnified by the absence of handset subsidies and the large prepaid connections base (prepaid accounted for 84 percent of Italian mobile connections in 2Q09). This has led to a price war in the prepaid segment, which is driving down effective price per minute and voice revenues. In order to differentiate and generate additional profits, Italian operators are now focusing on value-added services and innovative propositions to push their brands forward. In this context, our research also found that Italy has is approaching saturation with ‘real’ penetration currently at 85 percent – compared to reported per-connections penetration at 151 percent. The study found that Italian women were less loyal than men (83 percent compared to 78 percent), and that users in the 20 to 30 year age range were least likely to stay loyal to a single operator.

In Germany and the UK, only a third of consumers with more than one connection are using the same network provider for all their connections. These two countries average 1.4 SIM cards per user and real penetration has reached just over 90 percent, suggesting user saturation is also forcing operators to address consumer needs and increase marketing efforts. In order to fight churn and remain competitive, operators are being required to move away from being a pipeline to deliver voice-centric propositions in order to focus on maximising VAS opportunities.

In Western Europe, total churn rates are reflecting intense competition in most markets, which has led to mobile operators seeking to shore up or improve their market positions by constantly launching innovative offers in both prepaid and postpaid segments. Churn levels in the region increased to 2.16 percent in 2Q09 from 1.97 percent a year ago. Postpaid churn levels are more stable than prepaid mainly because mobile operators have developed sophisticated customer loyalty programs to retain their high-value customers. They have also launched innovative offers such as SIM-only offers – with monthly payments and no contracts – which help them to attract new customers and balance their postpaid market share.

North America is currently displaying more customer loyalty than Europe due to unique market dynamics such as its high proportion of postpaid customers and its relatively low level (by European standards) of multiple connection ownership. Postpaid connections accounted for 82 percent of total connections in North America in 2Q09 and, according to our research, users in the region maintain an average of 1.3 connections each. Prepaid connections increased by 19 percent in the year to 2Q09, compared to just 2 percent postpaid growth over the same period. This suggests that, while North American consumers currently appear more loyal than in Western Europe, this could change in line with the growth in prepaid connections.

Joss Gillet, Senior Analyst, Wireless Intelligence

The findings of our primary research highlight that mobile growth in developed markets is being driven by demand and consumer needs rather than supply and technology. Over the past few years, most operators in Western Europe have focused on attracting subscribers and pushing new technology to them. Most of these markets have now reached user saturation and mobile operators have had to drill into consumer segmentation and niche market opportunities to differentiate and re-invent traditional business models. In Japan, for example, we have seen Emobile disrupt a crowded and saturated market by rationalising and simplifying its portfolio of services, which led to an increase in market share and profitability over the past two years. In the UK, we have seen 3 and INQ partner to launch a number of handsets dedicated to specific social networking tools such as Facebook, Twitter or Skype. More recently, Vodafone has announced the upcoming launch of Vodafone 360, a suite of services designed to “put the user in control.” These trends and radical changes in strategies clearly confirm that mobile operators are willing to move away from a voice-centric delivery model to a model influenced by media and data consumption. In order to do so, mobile operators and their partners will have to push their brands forward and launch innovative propositions to re-direct the factors that underpin customer loyalty.