Two year contract trend could reverse by 2011

Operators will need to offer extra services to lock in savvy customers, say analysts. Aggressively priced smartphones and up front payments on hardware could see the trend towards two year contracts reversed by 2011. Analyst Gartner says it expects 12 month contracts to return to the norm in two years' time, as consumers move away from Sim-only in improved economic conditions. And there will be more pressure on operators to provide reasonable prices on those 12 month contracts, even on heavily subsidized smartphones. 2009 has been the year of the 24 month contract, with recent figures from GfK showing that the number of customers tied into two year contracts has surged tenfold in one year. Two year contracts represented a 58.5% share in October 2009 - up from 6.8% in October 2008. The trend for longer contracts can largely be attributed to the rise of more expensive smartphones, such as Apple's iPhone. Currently, devices that require a high subsidy mean networks seek to lock in customers for two years to claw back cash. But the price of smartphones such as the iPhone may come down, if the recent trend is to continue.