Skip to main content

Growing Negative Impact from Smartphone Subsidies

Mobile network service providers have a major business model impediment -- they're still subsidizing handsets, but not reaping the return on investment (ROI). The current global market outlook is troubling to analysts.

Moreover, savvy Over-the-Top (OTT) service providers and software application developers continue to take revenue share in the evolving marketplace -- often at the expense of the network service providers.

The pressure on mobile device subsidy ROI is caused by lagging worldwide carrier revenue growth which is not keeping up with subscription or connection growth -- or the cost of subsidizing expensive smartphones.

Connection growth is 10.9 percent CAGR from 2008 to 2013 and 4.2 percent for service revenue over the same period, according to the findings from the latest market study by ABI Research.

Device subsidy is the single largest cost for a mobile network service provider over the lifetime of a subscriber’s contract -- 68 percent of the revenue derived from a typical 24 month contract. A number of factors will increase pressure on device subsidy in the next two years, including:

  • Over the Top revenue loss.
  • Competitive price pressure.
  • Regulation (example, EU roaming regulations).
  • Multiple device ownership – smartphones, tablets, smart glasses, and other wearables.

"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," said Nick Spencer, senior practice director at ABI Research.

ABI believes that these mobile network service providers need to consider a more transparent and varied way for consumers to purchase their mobile devices.

Innovation in the mobile device market is so rapid that consumers do not want to be tied to an aging device for two years, but carriers cannot afford shorter contracts, so more flexible options are required for the customer and to reduce the subsidy burden for the carrier.

Transparent and outsourced subsidy is one such option, according to ABI's assessment. Gradual and strategic use of transparency and outsourcing will educate the consumer about the costs of the device and reduce the burden and risk for carriers, enabling them to wean themselves off the habit.

Popular posts from this blog

Industrial and Manufacturing Technology Growth

In an evolving era of rapid advancement, market demand for innovative technology in the industrial and manufacturing sectors is skyrocketing. Leaders are recognizing the immense potential of digital transformation and are driving initiatives to integrate technologies into their business operations.  These initiatives aim to enhance efficiency, reduce costs, and ultimately drive growth and competitiveness in an increasingly digital business upward trajectory. The industrial and manufacturing sectors have been the backbone of the Global Networked Economy, contributing $16 trillion in value in 2021. Industrial and Manufacturing Tech Market Development   This growth represents a 20 percent increase from 2020, highlighting the resilience and adaptability of these sectors in the face of unprecedented challenges, according to the latest worldwide market study by ABI Research . The five largest manufacturing verticals -- automotive, computer and electronic, primary metal, food, and machinery -

Rise of AI-Enabled Smart Traffic Management

The demand for smart traffic management systems has grown due to rising urban populations and increasing vehicle ownership. With more people and cars concentrated in cities, problems like traffic congestion, air pollution, and greenhouse gas emissions are pressing issues. Since the early 2000s, government leaders have been exploring ways to leverage advances in IoT connectivity, sensors, artificial intelligence (AI), and data analytics to address these transportation challenges. The concept of a Smart City emerged in the 2010s, with smart mobility and intelligent traffic management as key components.  Smart Traffic Management Market Development Concerns about continued climate change, as well as cost savings from improved traffic flow, have further motivated local government investment in these advanced systems. According to the latest worldwide market study by Juniper Research, they found that by 2028, smart traffic management investment will be up by 75 percent from a 2023 figure of

How GenAI is Transforming the Role of CIO

The introduction of Artificial intelligence (AI), and the emergence of Generative AI  (GenAI), are now resulting in two key focus areas for Chief Information Officers (CIOs) and their IT leadership team. "GenAI is not just a technology or just a business trend. It is a profound shift in how humans and machines interact," said Mary Mesaglio, VP Analyst at Gartner . "We are moving from what machines can do for us to what machines can be for us." AI platforms are evolving rapidly from being our tools to becoming our teammates. Gartner predicts that by 2025, GenAI will be a workforce partner for 90 percent of companies worldwide. CIO Leadership Market Development CIOs have a major role in how they shape AI and how AI shapes us. According to recent Gartner surveys of CEOs, enterprise CIOs are their number one choice to unlock the value of GenAI tools. In fact, CIOs and IT executives will prioritize two areas to unleash the possibility of AI over the next 12-24 months – t