Europe's mobile operators sell fewer phones but gain share as budget market shrivels

European mobile operators are capturing a slightly larger slice of the smartphone market, not because they're selling more gadgets, but due to a rapid decline in other sales channels. According to market research firm Counterpoint Research, operator sales of new smartphones dropped by 4 percent in the second quarter of this year, compared to the same period a year ago.

Meanwhile, sales through the open market, where phones are bought directly from independent retailers or manufacturers, fell even more significantly by 11 percent. This refers to devices purchased outright from third-party sellers or from manufacturers, typically SIM-free and unlocked, allowing customers to choose their preferred network.

Operators accounted for 36 percent of smartphone sales in Europe during the second quarter, up from 35 percent a year earlier. The open market still dominated the market share. The rise in prices due to an AI-driven memory crisis, which has led to a shortage of crucial components like DRAM and NAND flash, has hit budget devices the hardest.

As a result, producing low-cost devices has become commercially unviable, reports suggest. Operator sales tend to be higher-end models, as contracts spread the cost over monthly payments, making expensive devices more accessible. Counterpoint notes that Apple gained ground, surpassing Samsung as the leading brand in the operator channel.

Motorola and vivo are identified as the fastest-growing brands in this segment. The associate director at Counterpoint, Jan Stryjak, predicts that operators will maintain their market share for the next few quarters, as the low-end market continues to be affected by the memory crisis. However, he adds that independent retailers are increasing their promotional activities, which could offset some price rises and provide additional support to the open market.

Alternatively, more buyers may turn to the second-hand market, which is expected to see a 12 percent increase this year, as the rising prices make new phones less affordable. Counterpoint forecasts that 80 percent of top-of-the-line smartphones will feature agentic AI capabilities by 2027, meaning they will have software agents making decisions and performing actions on behalf of the user.