Currency fluctuations and limited innovation in smartphones are damaging the UK mobile phone market, according to the CEO of Dixons Carphone.
In a statement accompanying the company’s trading update, in which the retailer predicted a shortfall in profits in its mobile phone business for the year, Seb James said the post-pay market had been “challenging”.
He noted that currency fluctuations had made devices more expensive while technical innovation had become “more incremental”, leading customers to hold onto devices for longer.
James said it was “too early to tell whether handset launches or the natural lifecycle of phones” would reverse this trend, but said the company was planning on the basis that overall market demand would not correct itself in the 2017-2018 financial year.
“Over the longer term we believe that the postpay market will largely return to normal but in the meantime we have taken a conscious decision to invest in our margin and proposition to maintain market share and scale so we remain in a strong position as the market leader when this happens,” he added.
James also said changes to EU roaming legislation, which came into force in June, would have a negative impact on the business.
“While it is difficult with the limited data currently available to assess the precise impact of these changes, we currently estimate that the net negative effect will be a range of between £10m and £40m this year,” James said.
Like-for-like sales in the UK and Ireland rose four percent in the three months to June, but this was mainly thanks to growth in electricals, Dixons Carphone said.
Across all markets, sales rose six percent.
However, full-year profits before tax are now forecast to be in the £360 million to £440 million range, down from £501 million last year.
James’ comments on the mobile phone market follow figures released by Gartner earlier this week that suggested smartphone sales in Western Europe had returned to growth in the second quarter of 2017 on the back of sales of flagship devices.