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Mobile Phones Two Year Contracts to Reverse by 2011

Posted 7th January 2010.

A number of aggressively priced smartphone and mobile phone contracts are set for drastic cuts according to mobile analysts. Two year contracts are likely to be a thing of the past by 2011 as bargain-savvy customers search for greater services and a cost-effective deal.

Recent research by analyst, Gartner suggested that 12-month contracts would return as the norm for customers looking to purchase the latest smartphones and mobile phones on pay-monthly deals.

It appears there has been a staggering increase in the number of consumers tied into two year contracts in 2009. Recent figures produced from GfK backed up this theory, with two year mobile contracts representing a whopping 58.5% market share.

The underlying reason of long-term pay-monthly contracts is down to the rising cost of the high-end smartphones available on the market. The likes of the Apple iPhone, HTC Hero and Nokia N97 mini are expensive builds and manufacturers have attempted to subsidise production by locking consumers in with longer contracts.

Sony Ericsson and Motorola are already attempting to bring the cost of their high-end smartphones down, sparking predictions that Apple, HTC and Nokia will be forced follow suit in the coming year in order to maintain their position in the market.

Further predictions from Gartners research shows that the market share of smartphones is set to increase to over a third by 2013. If mobile phones carriers can make their pay-monthly contracts more attractive and cost-effective this figure is likely to be a realistic outlook.

Gartner analyst, Carolina Milanesi said: Two year contracts are an issue for manufacturers. They need to overcome economic issues and look at the features that go into a device; what do people really want on the handset that they are willing to subsidise?

They should look at how many devices are in a portfolio and try not to compete with themselves. They must leverage their scale to reduce costs.

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