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Home » SIM-only deals keep getting cheaper – but have we hit bottom yet?

SIM-only deals keep getting cheaper – but have we hit bottom yet?

In recent years, the popularity of SIM plans has increased and with it a rapid reduction in their price, with networks competing to become the most beneficial option.

And while those price drops were relatively small at the start, year after year, we see that the average cost of SIM-only deals is dropping rapidly, especially compared to the cost of a traditional phone contract.

In Ofcom’s Tariff Trends 2021 report, it found that the average cost of a SIM plan fell 10% in 2020 despite an increase in data usage. The same report found that those who took out a phone contract had to pay up to 23% interest compared to those who bought SIM-free plans and SIM plans separately.

But as this prevalence of SIM plans increases and prices continue to fall, when are networks going to rise and end it? Or, on the contrary, how do you stand out in a market crowded with increasingly low prices?

An example of the Three network

While there are plenty of examples of networks slowly lowering the price of their SIM-only deals, Three makes this perfectly evident with their unlimited data SIM plan.

Each year during Black Friday, Three drastically lowered their prices on Big Data plans. Each time, the network introduced an incredibly compelling deal with impressive value levels, and then the following year, they beat it.

  • Black Friday 2018: 100GB of data for £ 20 per month
  • Black Friday 2019: Unlimited data for £ 18 per month
  • Black Friday 2020: unlimited data with 5G for £ 16 per month

If Three continues this trend, it will be £ 14 from Black Friday 2021 – a 30% price drop in just three years.

Three SIM | Unlimited data, calls and texts | £ 16 per month
Three’s unlimited SIM plan has gone down in price several times over its lifespan. While we’ve seen it hit £ 22 per month, it has dropped to just £ 16 per month. It’s the cheapest price we’ve seen an unlimited data SIM plan drop in the UK and we imagine Three will struggle to beat.

More data and a change in purchasing methods

So prices are going down and the average purchase cost of mobile services has dropped by 10% over the past year, but are people’s purchasing methods still the same or is it just a matter of a price reduction on the whole market?

While 44% of people bought contracts between January and July of this year, the number of people who invested in a SIM plan and a phone without SIM is increasing with 39% of the population opting for this method.

Ofcom says these people were getting an average saving of £ 7.12 per month.

(Image credit: Ofcom)

This saving is due to a combination of the lower prices of SIM packages and the high interest charges found in contracts. And yet, despite prices seeming more affordable than ever, 6% of households in the UK said they had problems with the affordability of a mobile plan.

This is likely due to the fact that while the prices for most SIM plans have dropped significantly, low data rates have seen an increase of at least 6% over the past two years as demand for more data increases.

Plans from 10GB to 100GB and above have seen a steep price drop in recent years, but the lack of demand for less than 1GB means it’s hard to get your rate below £ 5 per month.

The future of SIM plans

All of this is obviously great news for consumers but the question remains: what does it mean for competing networks to offer the best possible value for money? Can they really afford to lower prices further to gain the advantage?

Ofcom’s report found the UK has the cheapest mobile rates overall compared to five other countries – France, Germany, Italy, Spain and the US . This means that UK networks already far outperform the rest of the world.

Instead, it’s likely we’ll now see networks looking for other ways to deliver value. A representative of retailer Affordable Mobiles explained: “UK mobile networks are already doing a great job of offering a wide range of great rates to meet customer needs.

“With that in mind, and given the amazing deals already out there, it’s hard to see how they can become more competitive in terms of price cuts. Instead, we could focus more on fine-tuning pricing portfolios and advantages. “

This is already something we are seeing happening in core networks like EE and Vodafone, but even more so in the rapidly growing list of MVNOs – mobile virtual network operators.

(Image credit: Ofcom)

The rise of MVNOs

Outside of the “big four” UK networks – O2, EE, Vodafone and Three – the market has grown rapidly over the years with providers known as MVNOs dominating the market.

Put simply, these are brands that don’t run their own networks and instead use the coverage of one of the four aforementioned. By not managing their own infrastructure, they are able to offer other benefits, including more flexible contracts, lower prices or special add-ons.

These MVNOs actually make up the vast majority of the market. Virgin, BT, Voxi, Sky, Tesco and giffgaff are some of the big names in the MVNO group. Since they do not have to manage their own infrastructure, these networks can charge far lower prices than the main operator from which they borrow coverage.

Networks and piggyback
Voxi Smarty BT Lebara Virgin Mobile ID Sky Giffgaff
Does he have his own network? No No No No No No No No
What network is he using? Vodafone Three EE Vodafone Vodafone Three O2 O2

Smarty, for example, uses the Three network but is able to offer the same amount of data for less than three data points at most. The same is happening with Virgin and EE, Voxi and Vodafone and with most MVNOs and the network they borrow from.

While each of these networks is very different in what they offer, a common theme we see is the length of the contracts they offer.

Rajesh Dongre, Commercial Director of Lebara Mobile, explained: “In the SIM Only category, customers increasingly want attractive offers that do not tie them to long contracts, so they have the choice to increase or decrease. the allowances of their package according to the evolution. Needs.”

Brands like Lebara, Giffgaff, Voxi, Smarty and iD Mobile are now offering their customers 30-day rolling contracts allowing them to switch if they need more data or if it becomes too expensive.

This flexibility is all the more important as the central networks introduce price increases above inflation for existing customers. The Ofcom report details the price increase of BT and EE by 3.9% in April 2021, Vodafone by 3.9% and Three by 4.5%.

Why stick with a network when it raises your price when you can skip a contract and switch to the network that has the best price at any time.

(Image credit: jeab05)

5G is no longer a bonus

In addition to affordable prices and large data caps, other major incentive networks have pushed to upgrade to 5G. However, while a year ago it was a competitive advantage, it quickly became the norm.

Aside from a small collection of MVNOs, all of the major networks now offer 5G with most, if not all of their SIM plans.

In Ofcom’s report, he found that the average price of 5G over six mobile connections fell from over £ 21 per month in July 2019 (when only two operators offered 5G) to £ 3 per month in October 2020.

So, what future for SIM alone?

While prices may continue to drop slightly, it seems much more likely that we will see networks rely on their unique selling points and other factors to stand out in this crowded market.

Of course, every network will strive for the cheapest prices and the best amount of data, but if all the prices become nearly the same, it will be the added features that count.

Voxi’s unlimited social media and streaming use, for example, makes it stand out, as does the inclusion of international calls by Lebara, Giffgaff’s frequent discounts for students, or EE’s position as a UK’s fastest network and the long list of free subscriptions it offers.

We would expect networks to really start relying on these factors to stand out by focusing less on lowering prices. As Wayne Freeth, head of e-commerce at Fonehouse, said, “If there’s room for the prices to be even cheaper, we’re not sure in the short term, but there will be. always good deals around ”.

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