Replacement cycles are stretching and now, price matters

“The handset replacement cycle is getting longer”. This statement has been declared in the latest Nielsen handset analysis that estimates that the handset and sim activation business has decreased a 20.6% in Spain over the first semester of the year (comparing it with the same period of the previous year).

It seems, according to the analysis, that the Spanish market is extending the handset renewing cycle from the 18 to the 24 months, and that expenditure affordability and sensitiveness to price are the main roots of this trend.

We confirm this conclusion after analyzing different pan European mobile operators’ traffic consumption and handset replacement rates (it is not just a question of Spain by the way).

Is the current crisis responsible for this? Having the telecommunication providers reached 4.7% less revenues in the second quarter of 2008, Vodafone and Telefónica (the two main players in the Spanish competitive environment) reported a relevant deceleration in their client’s average revenues per minute as a result of the significant decrease of the minutes of use of consumption.  This is mainly driven by the necessity of the customers to obtain cost reduction measures to surpass current economical situation better than looking for higher value-for-money promotions and handset campaigns.

This is aligned with the decreasing tendency of the mobile telecom market in Spain, which is estimated in more than a 10% (yoy – august 07 to august 08) and an overall 8.9% from January 08 till end of September. Most of the top Spanish executives affirmed that the mobile expenditure is a basic requirement for a huge amount of the Spanish society. I can’t agree with this statement. Unless mobile operators start to redefine their pricing strategy for the next years, we will still be seeing significant market decreases.

Let’s see what happens.

Nice reading.
CVA – Flying from Africa to Europe