The Credit Crunch Essays

The Credit Crunch Essays The Credit Crunch Essay The Credit Crunch Essay Impact of the Credit Crunch; the personal disposable income of consumers is to a large extent determined by the availability of credit and the economic condition. With the current economic and financial situation which has resulted in a general contraction of consumers spending ability, several industries have watched their revenues plummet. Businesses in general are experiencing difficulty in obtaining loans from banks for major investments and expansions due to the unavailability of credit and tighter credit conditions. Analysis by Ovum (a global advisory and reporting firm) has revealed that the mobile network operators revenue has not been impinged on by the credit crunch. They go on to report that overall, MNOs have seen a steady growth in revenues18. O2 reported a 10% growth in revenues in their 2008 end of year financial statement despite the testing financial times19. Also, a survey carried out by Mintel showed that although consumers were pessimistic about the condition of the economy, a large percentage was not willing to cut costs on their mobile phone usage. Their results disclosed that only 12% of their research respondents were looking to switch network for cheaper deals20. Subsequent analysis by Ovum in December 2008 showed that network operators may actually begin to feel the impact of the financial crises on their revenue. Also, with interest rates which have taken a nose-dive- from 5. 25% in February 2008 to 0. 5% at March 2009 after several cuts by the Bank of England, and the quantitative easing policy1 that has been implemented, it is expected that consumers will have more access to credit, and spending will be encouraged. O2 reported that its revenues were up by 7% in the first three months of 200921.   Times have changed. About 25 years ago in the UK, everyone survived without owning and using a mobile phone. However, in this present time, mobile phones have without a doubt formed a huge part of our lives as the need for communication is increases. Mobile phones serve many great purposes to users; necessary contacts can easily and promptly be accessed in an emergency, business users are able to carry out their businesses more swiftly amongst other uses. Consumers have stated that they own and value their mobile phones for both functional reasons such as convenience, personal safety, security and business and also less practical reasons such as fashion and style22. As well as increasing need for communication, an ongoing trend is increasing impatience to receive required information. The UK has become a population constantly on the go and in todays fast moving world more users require information and hope to receive it in very minimal time without much delay23. This is reflected in the innovation and use of the 3G services now offered to users by their network operators. Orange supplied figures which showed that mobile data downloads has increased by 108% in the last three months and their 3G customer base now stands at 3. 8 million users24. With 3G, users have direct access to high speed internet on the go, the ability to retrieve emails, and other required information. This trend does not favour fixed-line services and remains an advantage for network operators. DIY Broadband; in the UK, more and more people have access to high speed net connections. This media age trend has resulted in consumers having the ability to do things themselves; surf the web, compare prices between various network providers and find the most suitable deals. Also, consumers are actively sharing experiences, preferences, pros and cons of different network providers and deals on price comparison and consumer rating sites such as uswitch. With access to faster internet and availability of such useful information, consumers are more aware of what they want and are able compare prices to find the best deals. Consequently, this has ensued in increased competition between providers as they seek to provide the best deal in order to retain customers and attract new ones. This trend has also adversely affected the revenue of providers who are unable to keep up with the high level of competition25. Figure 2: Broadband Penetration in the UK from 2004-2008 Source; Mintel Reports, Mobile Phones and Network Providers UK November 2008. in the UK there are now more people of pensionable age over 60- than people under the age of 16. This consumer group-elderly has been forecasted to be the fastest growing population segment in the next five years as the UK is moves towards an ageing population26. The elderly typically face difficulties with the use of mobile phones such as reading from the small phone screens, incompatibility with hearing aids and increasing complex technology. Although the current over 65s have grown with technology, they generally have low spending ability and as such the ageing population trend may not be favourable to the industry. Nonetheless, this negativity is likely to be offset by the generally expanding UK population, and the increasing population of the 15-24 and 25-34 age groups27. These categories of consumers are more technology-savvy and typically opt for more stylish handsets packed with functionality. These segments therefore present a strategic target group for network operators. A Greener Society;, preventing climate change and saving the environment is a trend affecting most industries around the world but has been reported to be a major issue of concern for the telecoms industry for 200928. Several initiatives implemented by Ofcom aimed at reducing the industrys carbon dioxide emissions include; reducing power consumed by Information Systems, driving down building energy consumption, reducing business travel and increasing use of conferencing technology, further reducing paper consumption and further reducing the volume of waste sent to landfill by encouraging more recycling. Implementing these initiatives is beneficial to the network operators not only because they are doing their bit to save the planet, but because it conveys positive messages about the brand, boosts the brand perception as well as provides a differential advantage from competitors28. Also, with increasing mobile phone users and the need for network operators to improve coverage, more and more masts have being erected around the country. Currently, there are 51 300 base station sites which may rise to 52 500 by the end of 200929. These masts typically consumer a lot of energy and impact negatively on the environment. Subsequently, this has triggered concern by the public and environmental activists. Operators have made efforts to reduce high energy consumption by developing base stations that utilize lower energy levels30.