The mobile phone sector faces problems of slowing technological development and far too many stores. These are the classic symptoms of maturity and we see parallels with the PC market, which has had to cope with similar problems over the last five years. Replacement cycles will be pushed out and Sim-only contracts will break the link between handsets and contracts. The next few years will be tough for mobile phone retailers and the weak economic environment can only make matters worse.

The focus of this report is mobile phone retailing and it focuses on the sale of equipment, contracts and accessories through specialist retailers.

The sector has seen dramatic growth as mobile phone ownership has risen. But there is little further scope for increasing phone ownership, although there may be some growth as the mobile makes the need for a fixed line redundant.

Standard contract or post-pay subscription packages – people pay a monthly line rental, with payment usually made via direct debit. Over the last year the standard 18 month contract has been replaced by a 24 month one. Handsets are usually subsidised by the network provider for new customers and hence tend to be comparatively cheap, or even free with certain tariffs. Contract users can choose from a range of tariffs, depending on how heavily they are likely to use their phone. Most packages offer a ‘bundle’ of free minutes per month and call charges are generally lower than on pre-pay schemes.

Sim-only contracts allow a customer to pay just for the network usage. They then have to buy their own handset. In practice this can be a much cheaper option than taking out a post-pay contract.

Pre-pay/pay-as-you-go packages – people buy a handset and purchase calls in advance, usually via vouchers but increasingly by using credit or via top-ups available on the internet. Call charges tend to be higher than for contract packages.

Bluetooth – a specification for short-range wireless connectivity that allows users to make wire-free connections (via a radio link) between a wide range of communication devices.

HSDPA – a mobile phone telephony protocol that allows UMTS users to have higher data transfer speeds and greater capacity.

MMS (Multimedia Messaging Service) – telephony messaging system that allows sending messages that include multimedia objects (images, audio, video, rich text) and not just text messages to other MMS devices.

MVNO (Mobile Virtual Network Operator) – companies that offer the same spectrum of services to the consumer as the network operators, but do so by buying bulk airtime and line/access provision services from others and rebadging them (Virgin Mobile and Tesco are examples).

Network operators – providers of the network infrastructure (fixed-line or radio), eg BT or Vodafone.

Service providers – term used in mobile telecommunications to describe a wholesaling function for the resale of airtime.

SIM (Subscriber Identity Module) – smartcard used in digital phones, which carries the user’s identity for accessing the network and receiving calls. Also acts as the phone’s memory for features such as stored numbers.

UMTS/3G (Universal Mobile Technology Service) – also known as 3G. UMTS technology allows full multimedia content such as TV, internet, music, video conferencing, etc on mobile phones and devices.

VoIP (Voice over Internet Protocol) – This technology allows people to make voice calls using a broadband internet connection instead of a regular (or analogue) phone line. Some VoIP services may only allow you to call other people using the same service, but others may allow you to call anyone who has a telephone number – including local, long distance, mobile, and international numbers. Also, while some VoIP services only work over a computer or a special VoIP phone, other services allow you to use a traditional phone connected to a VoIP adapter.

WAP (Wireless Application Protocol) – an agreed standard that enables WAP-compatible mobile phones to access specially-created or cut-down versions of internet services.