RESEARCH FORECAST REPORT SMARTPHONES IN WESTERN EUROPE: TRENDS AND FORECASTS 2015 2020 KEREM ARSAL and HEENU NIHALANI analysysmason.com
About this report This report analyses the smartphone markets in Western Europe and describes the trends that affect sales and adoption. It is based on several sources: Analysys Mason s internal research, including global and regional telecoms forecasts and the Connected Consumer Survey (conducted in 16 countries in 2015) interviews with key stakeholders in the smartphone market secondary information from vendors, operators, regulators and other formal sources. WHO NEEDS TO READ THIS REPORT Operator-based strategy executives and mobile device managers who are interested in smartphone market trends, the role of operators as smartphone distribution channels, and recent changes in device bundling, financing and upgrade plans. Device manufacturers that want to identify worldwide and regional opportunities in terms of smartphone unit sales growth and primary regional drivers. Smartphone distributors and wholesale executives who are interested in learning more about operator and vendor initiatives for smartphone sales, regional growth expectations and key trends. GEOGRAPHICAL COVERAGE Worldwide Western Europe France Germany Spain UK Worldwide KEY METRICS Unit sales of mobile handsets (smartphones and nonsmartphones) Mobile handset connections (smartphones and nonsmartphones) Unit sales of smartphones by vendor and by operating system Western Europe Unit sales of mobile handsets (smartphones and nonsmartphones) Smartphones share of mobile handset connections and unit sales Country-level Smartphones share of mobile handset unit sales 2
Contents 5. Executive summary 6. Executive summary: Smartphone sales will benefit from 4G service take-up, but SIM-only plans will limit growth 7. Worldwide trends 8. Worldwide: Smartphone markets are saturating operators and vendors must reassess their priorities 9. Worldwide: Growth in unit sales will depend on emerging markets and will come mostly from emerging Asia Pacific 10. Worldwide: Operators are key sources of smartphones in most regions, but they lost some ground to other channels in 2015 11. Worldwide: Vendor financing is the end-point of gradual shifts in operator device strategies rather than an abrupt change 12. Worldwide: Vendor financing plans are most likely to succeed in countries where users are ready for SIM-only contracts 13. Worldwide: Operator bundles are in demand and play a role in prepaid-to-postpaid migration 14. Worldwide: Apple leads the high-end market and Chinese vendors are capturing demand at the low end 15. Worldwide: ios s market share of unit sales will remain stable at around 15% until 2020 16. Regional trends 17. Western Europe: Migration to 4G boosts smartphone sales, but replacement cycles are slow and SIM-only contracts grow 18. Western Europe: Key regional trends 19. Western Europe: Operators have lost ground to retailers in 2015, but they are still central to the smartphone supply chain 20. Western Europe: Apple users score higher NPS for mobile services, except in Spain where Android dominates 21. Country-level trends 22. France: Operators focus on minimising upfront payments for smartphones; Windows Phones do reasonably well 23. Germany: Smartphone sales will peak at 31 million units in 2018 as accumulated demand catches up 24. Spain: Android continues to dominate although ios mildly improves market share during flagship launches 25. United Kingdom: Operators place ios at the core of their portfolios and marketing efforts 26. Forecast methodology and assumptions 27. Forecast methodology and assumptions 28. About the authors and Analysys Mason 29. About the authors 30. About Analysys Mason 3
List of figures Figure 1: Smartphone unit sales and smartphones share of mobile handset unit sales, Western Europe, 2012 2020 Figure 2: Mobile handset unit sales by type, and smartphones share of handset connections, worldwide, 2012 2020 Figure 3: Smartphone unit sales by region, 2014 and 2020 Figure 4: Percentage of respondents who bought their most recent handset from an operator, 16 countries, and averages for 2014 and 2015 Figure 5: Device bundling and financing plans by type Figure 6: Seven areas of consideration for operators when assessing the potential impact of SIM-only and vendor financing take-up Figure 7: Choice of next mobile tariff type among those that plan to change their tariffs, by current tariff type, 6 European countries, US and South Korea Figure 8: Choice of next mobile tariff type among those that plan to change their tariffs, by current tariff base, 8 countries in MEA and emerging APAC Figure 14: Most recent handset purchase by channel and country, 2015, and 2014 comparison for operators Figure 15: Operators as a channel for smartphones and iphones, and NPS differential of Apple users for mobile services, 2015 Figure 16: Smartphone unit sales and smartphones share of mobile handset unit sales, France, 2012 2020 Figure 17: Smartphone unit sales and smartphones share of mobile handset unit sales, Germany, 2012 2020 Figure 18: Smartphone unit sales and smartphones share of mobile handset unit sales, Spain, 2012 2020 Figure 19: Smartphone unit sales and smartphones share in total handset sales, United Kingdom, 2012 2020 Figure 20: Main enablers and constraints for our smartphone forecasts Figure 9: Smartphone unit sales by manufacturer, worldwide, 2012 2020 Figure 10: Smartphone unit sales by operating system, worldwide, 2012 2020 Figure 11: Mobile handset connections by type, and smartphones share of connections, Western Europe, 2012 2020 Figure 12: Smartphone unit sales and smartphones share of mobile handset unit sales, Western Europe, 2012 2020 Figure 13: Key regional trends in handset markets, Western Europe 4
Smartphone unit sales (billion) Smartphones in Western Europe: trends and forecasts 2015 2020 Worldwide: Growth in unit sales will depend on emerging markets and will come mostly from emerging Asia Pacific Emerging Asia Pacific will be the primary driver of growth in unit sales, thanks to the presence of many first-time buyers in populous countries. The growth in smartphone units sold will come primarily from emerging markets. Sales in developed Asia Pacific, North America and Western Europe will stagnate, but sales in the rest of the world will increase at a CAGR of 8% between 2015 and 2020. Emerging Asia Pacific will represent the best opportunity for smartphone vendors because of the presence of many firsttime buyers in large underpenetrated markets, such as China, India, Indonesia and Pakistan. By 2020, annual sales in this region will have grown by nearly 300 million units, compared to 2015; this will be double the total increase in annual units sold between 2015 and 2020 in all other emerging markets. Already high levels of smartphone adoption will limit the number of first-time buyers in many developed markets. Furthermore, consumers are increasingly difficult to impress with incremental innovation in smartphones and are therefore unwilling to accelerate their replacement cycles. This is a problem that vendors and operators began to address in 2014 and 2015, particularly in the USA, with device financing and early upgrade schemes. Figure 3: Smartphone unit sales by region, 2014 and 2020 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2014 2020 Central and Eastern Europe Developed Asia Pacific Emerging Asia Pacific Latin America Middle East and North Africa North America Sub-Saharan Africa Western Europe Source: Analysys Mason 9
Western Europe: Migration to 4G boosts smartphone sales, but replacement cycles are slow and SIM-only contracts grow WE 4G migration will be a key stimulus of smartphone sales, but will not be strong enough to generate growth in unit sales until 2020. Smartphone sales in Western Europe will be stagnant throughout the forecast period. This will be due to the opposing forces of consumers migration to 4G services, which will generate demand for new smartphones, and the emergence of SIM-only dynamics in some markets, which drive and are driven by the long-term usage of existing smartphones. All major operators in Western Europe have launched 4G networks, but 4G connections comprised only 15% of all mobile connections (excluding M2M) in 2014. We expect this ratio to grow to 76% in 2020. This suggests that there is still a large group of potential buyers that will purchase 4G-capable devices. On the other hand, the existing maturity of smartphone adoption in the region and operator initiatives that encourage SIM-only contracts (especially in markets with established converged bundles) will prevent the replacement cycles from significantly accelerating in the future. We believe that Apple has consolidated its position as the vendor of smartphones with innovative features. Other vendors will find it hard to replicate the amount of interest that Apple generates in segments that purchase the high-end devices. Figure 11: Mobile handset connections by type, and smartphones share of connections, Western Europe, 2012 2020 Connections (billion) 0.6 0.5 0.4 0.3 0.2 0.1 0.0 2012 2012 2013 2013 2014 2015 2014 2016 2015 2017 2016 2018 2019 2017 2020 2018 Unit sales (billion) 2019 Percentage of unit sales 2020 100% 80% 60% 40% 20% 0% Smartphones Non-smartphones Smartphones % Figure 12: Smartphone unit sales and smartphones share of mobile handset unit sales, Western Europe, 2012 2020 0.15 0.10 0.05 0.00 Percentage of handset connections Source: Analysys Mason 120% 100% 80% 60% 40% 20% 0% Smartphones Smartphones % Source: Analysys Mason 17
CONTENTS FORECAST SUMMARY WORLDWIDE TRENDS REGIONAL TRENDS COUNTRY-LEVEL TRENDS FRANCE GERMANY SPAIN UNITED KINGDOM FORECAST METHODOLOGY AND ASSUMPTIONS ABOUT THE AUTHORS AND ANALYSYS MASON 28
About the authors Kerem Arsal (Senior Analyst) is a key contributor to Analysys Mason s Mobile Services research programme, which helps operators to understand, and monetise to maximum efficiency, the interplay between voice, messaging and data services. His work involves in-depth coverage of issues such as customer retention, mobile data pricing, MVNO strategies, and the impact of regulation and roaming. Previously, Kerem was a research manager at Pyramid Research, where he was responsible for setting the thematic research agenda across multiple tracks and regions. He also headed numerous projects around operator strategies, as well as commercialisation of, and demand assessment for, new products in the consumer and enterprise segments. Heenu Nihalani (Research Analyst) is a member of Analysys Mason s Consumer Services research team in London, contributing to the Mobile Services, Mobile Devices, Future Comms and Media, and Digital Economy Strategies research programmes. Prior to joining Analysys Mason, she worked as a financial knowledge broker in London, and as a journalist and copywriter in Hong Kong. Heenu holds an MSc in financial analysis from the Hong Kong University of Science and Technology, and a Bachelor's degree in philosophy, politics and economics from the University of Warwick. 29
About Analysys Mason Knowing what s going on is one thing. Understanding how to take advantage of events is quite another. Our ability to understand the complex workings of telecoms, media and technology (TMT) industries and draw practical conclusions, based on the specialist knowledge of our people, is what sets Analysys Mason apart. We deliver our key services via two channels: consulting and research. Research We analyse, track and forecast the different services accessed by consumers and enterprises, as well as the software, infrastructure and technology delivering those services. Research clients benefit from regular and timely intelligence in addition to direct access to our team of expert analysts. Our dedicated Custom Research team undertakes specialised and bespoke projects for clients. For more information, please visit www.analysysmason.com/research Consumer and SME services Digital economy Regional markets Network technologies Telecoms software Strategy and planning Regulation and policy Performance improvement Transaction support Consulting Our focus is exclusively on TMT. We support multi-billion dollar investments, advise clients on regulatory matters, provide spectrum valuation and auction support, and advise on operational performance, business planning and strategy. We have developed rigorous methodologies that deliver tangible results for clients around the world. For more information, please visit www.analysysmason.com/consulting 30
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