Mobile carriers aren’t reaping the returns from their device subsidies and need to break the long-held customer incentive, according to a new report from ABI Research.
Whereas mobile connections are growing at a 10.9% compound annual growth rate (CAGR) worldwide from 2008-2013, carrier revenue growth is only increasing at a 4.2% CAGR, ABI points out in its “Mobile Handset Go-to-market Strategies Research Services.”
The single largest cost component for a mobile carrier over the life of a subscriber’s contract, device subsidies represent 68% of the revenue derived from a typical 24-month mobile device service contract, ABI analysts note. Several factors are going to up the pressure on device subsidies over the next two years, they say, including:
- Over the Top revenue loss
- Competitive price pressure
- Regulation (see EU roaming regulations)
- Multiple device ownership – smartphones, tablets, smart glasses, and other wearables
Yet device subsidies are key factors at the point of contact with customers. Though this very valuable, it also leaves them in something of a quandary.
“Carrier’s cannot continue to subsidize all these devices, yet they must maintain their place in the value chain, their relationships and touch points with subscribers, where device subsidy plays an important role,” ABI senior practice director Nick Spencer was quoted in a press release. Carrier’s need to consider a more transparent and varied way for consumers to purchase their mobile devices.”