The SIM card is effectively the brain for your mobile phone, carrying the unique phone number, storing personal data and enabling phone operation. It’s the most important component in a phone and, as telecoms operators are beginning to discover, increasingly the only part of the phone that consumers want to contract for. SIM-only contracts are gaining popularity predominantly because they offer much cheaper deals than those contracts that also factor in the cost of a phone. But what does this mean for the mobile phone market in the UK and, if you’re looking for a SIM-only contract, where can you get the best deals?
SIM-only contracts – the market
At the start of 2017, SIM-only deals represented around 27% of the market for mobile phone contracts in the UK. By the end of 2018 that figure is predicted to reach 34%. And by 2021, the experts have said that around 54% of consumers are likely to be on SIM-only contracts. This is a trend that is taking shape right across Europe – in fact, Spanish consumers are now almost exclusively using SIM-only contracts.
Why are SIM-only contracts so popular?
The obvious appeal is that SIM-only contracts are cheaper. You pay less for a deal that only covers the SIM because the cost of the phone is excluded from the price. Traditional mobile phone contracts bundle everything in to the estimated monthly cost, including the price of the SIM and the price of the handset. This can considerably increase what you pay for your contract. If you buy an iPhone today, for example, – straight from the Apple Store – you’ll pay £549 for 4.7 inch iPhone 7 and £699 for a 5.5 inch phone. The new iPhone X starts at £999. Given these costs it’s not difficult to see why a traditional mobile phone contract costs more than a SIM-only deal. And yet, at the same time, mobile phone operators are still making a pretty tidy profit on traditional deals with consumers. It’s this awareness of being profited from, as well as the desire to cut monthly costs, that is driving more and more people towards opting for a SIM-only deal.
How does a SIM-only deal work?
The contract. Although you’re not getting the phone you still have to sign up for a contract to get the best prices for a SIM-only deal. You’ll usually be offered either a 12 month contract or a 30 day rolling contract.
The phone. In order to use your current phone with a SIM-only contract it will need to be unlocked. If you got your phone via a contract with another provider then it will be locked to the network that sold it to you. It’s simple to get your phone unlocked – if you’re out of contract on the phone then your old provider has to do this for free. If your contract is still running on your phone – or you bought it as a pay-as-you-go – then you might be charged to get it unlocked (up to £15).
The switch. Make sure you give enough notice on your old phone contract – most require 30 days. Remember that if you’ve signed a contract for two years then you won’t be able to leave until after those two years are up. If you want to keep your old number you’ll need to get a PAC (Porting Authorisation Code) from your old provider.
SIM-only deals to look out for
The best deal for you will be one that gives you the usage you need. You can see how much data, text and voice minutes you used last month via your existing provider and base your search for a new deal on that. Some of the best deals around at the moment include:
Virgin Mobile. A 12 month contract with unlimited texts, 1500 minutes and 2GB of data costs £7 a month.
A 1 month contract with 5000 texts, 2000 minutes and 2.5GB of data is £7.50.
Vodafone. A 12 month contract with unlimited texts and calls and 3GB of data is £8 a month.
A 1 month contract with 5000 texts, 500 minutes and 5GB of data is £10 a month
The future of the UK mobile phone market
If the predictions are right then it’s likely that the majority of consumers in the UK will move to a SIM-only deal in the next three or four years. This means that the big mobile phone operators will need to offer better SIM-only deals to be more competitive – or improve the appeal of their traditional contracts. For the handset manufacturers there are implications too – Apple and Samsung, for example, are already looking at putting more resources into “direct to consumer” sales to take advantage of the increase in the number of consumers looking to buy a handset to go with their SIM-only deal. These days it could make more sense to take out a loan to pay for the phone outright and buy the sim separately.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read more about Amanda Gillam