Price vs. Data: The emergence of the 12 Month SIM Only contract

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Whilst One Month SIM Only plans continue to dominate volume, the increasing demand for data allowances is encouraging the rise of 12 Month contracts.

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In the past two years a clear trend has emerged when it comes to contract length in the SIM Only market. At Awin, we track transactional data for all major telecoms brands in the UK, and can see first-hand how the uptake of One Month and 12 Month SIM Only plans have trended over time.

Looking at Awin transactional data from January 2018 to December 2019, we can see that One Month SIM Only plans have frequently outpaced 12 Month plans. However, if we dig a little deeper, we can see that 12 Month plans are on a growth trajectory, recording +18% YoY uplift in 2019, while the often cheaper One Month plans have recorded a -10% YoY decline in that same period.

When comparing SIM Only plans in the market it is evident that larger data allowances are more widely available on fixed 12 Month SIM Only plans, rather than the more flexible One Month plans. We should consider as well that data usage has gradually increased over the past few years.

Ofcom’s 2019 Communications Market Report found that mobile data usage increased to an average of 2.9GB in 2018, up from 1.9GB in 2017. Much of this growth is being driven by video-on-demand services such as Netflix and Amazon Prime, and we should expect that growth to continue in 2020 with the emergence of Disney+ and Apple TV+. Ofcom also reported in their 2019 Media Nations Report that eight in 10 adults in the UK are increasingly using their smartphones to watch more videos on the move, and two in five adults now consider online video/streaming services to be their main source of TV and film consumption.

We’ve also seen Mobile Network Operators (MNO’s): EE, Three Mobile, Vodafone and O2, offering Unlimited Data within their SIM Only plans. Grouping high data SIM Only plans (25GB+), we’ve seen a +47% YoY increase in 2019 highlighting the thirst for increased data.

The launch of 5G from EE, Vodafone and Three Mobile in May, July and August respectively has significantly increased the demand for higher data SIM Only plans, and we should expect that to continue into 2020 as 5G continues to mature.

With less handset innovation and increased handset cost, customers are no longer viewing SIM Only contract lengths as a unique selling point. Instead they are happy to be tied down to longer contracts with higher data plans.

Research conducted by Deloitte supports this point, and suggests that smartphone users are holding onto their devices for longer before upgrading. The research found that 59% of respondents confirmed that they purchased a new device in the previous 18 months, which was down from 62% in 2017 and 66% in 2016.

Ofcoms ‘text-to-switch’ introduction in July 2019 also resulted in a noticeable shift in the SIM Only market. We found that the week of ‘text-to-switch’ recorded the third largest SIM Only sales result since 2014, out-pacing each of the previous Black Fridays. The increased ease in switching mobile network will surely now make customers more price and data sensitive than ever before.

All of the data suggests that we are beginning to see a shift in consumer habits, and whilst One Month SIM Only plans continue to dominate volume, the increasing demand for data allowances is encouraging the rise of 12 Month contracts. Customers in the market for low-end price points will continue to take the more flexible One Month SIM Only contracts. But, with less apparent smartphone innovation, increasing data demands, and the emergence of 5G, we expect to see the continued shift of customers taking more fixed term 12 Month SIM Only contracts into 2020 and beyond.  

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