Orange goes 'environmental' with SIM-only deal

UK: For an industry that is seeking innovations to protect it from the recession in Europe, Orange France has demonstrated a genuine ‘thinking outside the box’ strategy.

With one strike, the operator has raised its environmental credentials, helped raise funds for an environmental charity, saved money for some of its customers and made money for itself. Orange’s offer is effectively a SIM-only package, as it asks existing customers to sign up for a 12-month contract without offering them a new handset.

Under the terms of the offer, which is available to its customers in mainland France only, Orange will give a customer a €40 cheque if they renew their subscription for a further 12 months but continue using their mobile handset. A further €5 is donated to the World Wildlife Fund (WWF). The offer has been in place since early March but is only available to customers who have accumulated at least 1,500 loyalty points under the Orange loyalty program.

Commendably, Orange is positioning the offer as part of its ecological approach to commercial policy and its relationship with customers. The operator has already developed ecological product labelling, which helps customers to choose handsets according to their environmental rating. With its latest SIM-only offer, Orange said it is encouraging its customers to extend their mobile phone’s lifecycle to help reduce raw material usage, limit energy consumption and cut waste.

It’s all part of a growing trend

Orange’s latest offer adds to the growing trend towards SIM-only contract packages in the industry. Generally, operators see SIM-only deals as a no-frills mobile contract package and are using them to push up their postpaid customer base.

Mostly, operators are keen to promote SIM-only as it helps them to cut down on handset costs (subsidies where applicable) and makes for an effective customer retention tool. Orange and SFR already offer SIM-only packages in France and this latest offer is part of a service/marketing evolution in SIM-only offers around the world.

Ovum’s forthcoming report on SIM-only offers will look at the different implementations of SIM-only and will highlight how operators are using it for loyalty/retention purposes and as a recession-buster.

Another blow for handset makers

The growing trend toward SIM-only deals is a threat to the business model of handset makers. At a time when the likes of Nokia and Sony Ericsson are groaning under poor sales, the introduction of further SIM-only deals in another major European market will be a big blow. Worse still, linking SIM-only deals with society’s increasing environmental awareness has ramifications for handset makers.

Sony Ericsson has already issued a profits warning for 1Q09 and Nokia has announced several job-cut plans. If SIM-only deals gain traction across the continent, they will have a lot more to worry about in 2009.

Worryingly for handset makers, they cannot stop mobile operators from launching SIM-only deals. Such offers threaten the established status quo in how operators and handset makers cooperate in the market. To their credit, handset makers have long anticipated this and are pushing aggressively to diversify their product base into offering content services and setting up application stores.

From an erstwhile symbiotic relationship, they are increasingly pursuing strategies that are disruptive to the business model of mobile operators, see the debate over Nokia’s N97 and its support for VoIP. But will the handset makers succeed in their fightback? Ultimately, promoting technologies such as Y-Comm and device/service bundles such as Amazon’s Kindle could tilt the balance of power in favour of the handset makers.

The author is senior analyst at Ovum.