Forget the fact that it’s summertime: it must feel pretty chilly right now if you’re a mobile operator in Europe. Across the continent, evidence is mounting that people are starting to change their relationship with the mobile industry — and it has operators worried.
A few days ago, it was revealed that record numbers of Spaniards are ditching their handsets — with the number of lines dropping by around 380,000 in April.
And now statistics from France suggest that the number of mobile sold will be down substantially this year. In fact, according to figures published by the French newspaper Les Echos, handset sales in France are set to fall from to their lowest level in years.
The mobile sector is in turmoil. And operators are not the only ones to see a change: handset manufacturers are also experiencing disruptions. According to the firm GfK, in 2012, the number of mobile phones sold in France will be lower than last year, with about 22.5 million phones set to be purchased this year, against 24.3 million in 2011.
It’s all a long way from a few years ago, when Europe (and the world) seemed locked in a romance with mobile that would never end. But suddenly that romance feels like it’s on the verge of turning into a tragedy.
So why is this happening? Are Europeans finally ending a decade-long affair with mobile? Is Nokia’s decline having an impact on the rest of the market?
Well, the best answer is probably just to say that it’s complex. There are several reasons for declining mobile adoption, and none of them give the complete picture.
First there’s the big fat obvious issue. The economic crisis and continuing trouble in the Eurozone is making life tough for ordinary people — especially in Spain, where unemployment is running at around 25 percent. That means many people on low incomes are cutting back, which is why (for example) the hardest-hit part of the Spanish mobile sector was prepay.
But Spain’s month-on-month drops have been happening for several months, and now the cutbacks are deeper than most people expected. In fact, depending on how you look at the numbers, they even look a little counter-intuitive: after all, some analysts had quite logically concluded that pre-pay would rise while subscriptions would fall as cash-strapped users cancelled their contracts and went for a pay-as-you-go option. That’s not happening.
There are also little local quirks to remember. In France, for example, analysts suggest that part of the sales decline could be the arrival of innovative new provider Free, which offers customers extremely low cost packages because it offloads voice traffic over Wi-Fi wherever possible. Lots of people are joining Free with unlocked phones — buying SIM cards, but not new handsets.
Meanwhile in Spain, Telefonica and Vodafone have tested out a new business strategy of cutting subsidies on handsets, and it has really hit them hard where it hurts.
But the more concerning issue for the industry is that these drops are not just limited to troubled nations like Spain, or even indirectly troubled nations like France (which has been dragged into the mire through its relationships with the struggling Mediterranean economies). It’s also happening elsewhere: in the Netherlands, for example, the mobile industry has been watching things drop away for some time.
But lower turnover is not necessarily a bad thing
If you look at this from a different perspective, however, things may not be so terrible. Profits may be under pressure, but the market is moving towards smartphones — which are far more valuable to operators than the throwaway, highly-subsidized lower tiers of the market.
Maybe people are purchasing fewer phones because they’re more expensive. Or maybe they’re just making the old ones last longer. Maybe the old ones are just better. Maybe people are canceling contracts because they’re being more sensible about their spending and reining in costs in an appropriate manner. Don’t forget that for many years, most major European countries have had more than 100 percent mobile penetration.
Even if there are still reasons to be cheerful. Mobile penetration is enormous, and actual data usage is still sky high.
Europe may not be infatuated with mobiles any more. Things are rationalizing. It’s not longer Romeo and Juliet, it’s When Harry Met Sally.
Photograph of crying woman copyright Yuri Arcurs/Shutterstock