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For the first time, less than half of all smartphones in Australia were acquired via mobile services contracts in 2013, according to new research released today by technology analyst firm Telsyte.

The Telsyte Australian Smartphone Market Study has been tracking the use of mobile handsets and smartphones in Australia for the past seven years. The 2014 report indicates outright purchase of smartphones by consumers has been growing in popularity as the price of devices and carrier subsidies have both been falling.

Telsyte research found that only 43% of Australians 16 years and older had acquired their smartphone via mobile service contract, compared to 57% in 2012. Around 30% of those that acquired a smartphone chose to buy it outright in 2013, with the remainder receiving their smartphone as a gift, as a company phone or as a ‘hand me down’.

“The unbundling of handset and mobile service contracts has been growing in popularity as consumers seek new handsets more frequently than the typical 24 month contract,” Telsyte Managing Director Foad Fadaghi says.

Telsyte research indicates despite reductions in carrier handset subsidies, free handsets on mobile contracts continue to appeal to consumers and have helped Android improve its market share. Telsyte research found that of those originally on a mobile services contract, 56% acquired their handset free of charge or without additional monthly payments.

Telsyte estimates that there were 15 million Australian smartphone users at the end of 2013, an increase of 2.6 million over 2012. Android remained the leading platform with a just over 50 per cent of the installed based, followed by Apple (42%), and ‘Others’, which includes Microsoft, Blackberry, Symbian, etc., with 8%.

Telsyte research shows that repeat purchase intentions are increasing as users seek familiarity of platform or model. 73% of iPhone users (up from 71% in 2012) who intend to purchase a smartphone are looking to buy another iPhone. Android repeat purchase intentions are at 56% (up from 52% in 2012).

The purchase of new handsets has created a glut of second-hand handsets. The gifting, and hand me down and second-hand user segment nearly doubled in the 12 months ending 2013.

The younger generation continues to lead the smartphone charge with nearly half (46%) of people under 34 planning to purchase a new smartphone within the next two years. More than half of this age group rate the camera quality of the smartphone as “important or critical”.

Telsyte expects Android to hold at least half the market until 2018 with no immediate threat to its dominance in the mid-market. But outside the main two operating systems (iOS and Android), Telsyte expects challenger platforms to double their share from 8% in to2013 to 16% by 2018. Microsoft is expected to be the biggest challenger, but a range of others including Tizen, Sailfish and Firefox are expected to battle it out for third spot.

Telsyte Senior Mobility Analyst Alvin Lee says despite the dominance of iOS and Android, the battle for the mobile OS is entering a new phase as vendors to look to differentiate from Android and begin supporting new OS initiatives.

“It’s possible that Google will experiment with Chrome-based smartphones as an alternative to Android at some point,” Lee says.

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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire and editor of sister publication CommsWire. He is also founder and Research Director of Connection Research, a market research and analysis firm specialising in the convergence of sustainable, digital and environmental technologies. He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.

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