INSIGHTanalysis: Mobile Sector Seeks To Maintain Growth
Despite the continuing uncertainty in technology markets and disappointing uptake of new mobile data services, the cellular industry has picked itself up and shown renewed signs of growth in the past year. This upward trend is set to prevail during 2003 but following a sector-wide reality check, operators have been forced to lower their long-term expectations and adjust strategies accordingly.
The new century saw the telecoms bubble burst in spectacular style. Worldwide mobile phone sales declined by 3.2% in 2001, the first recorded annual fall, forcing the entire industry to take stock. With market penetration approaching saturation, operators could no longer count on significant increases in the user base and replacement rates were lower than expected.
It was hoped that the introduction of enhanced data services would spark an upsurge in sales in 2002. In the event, modest growth of 6% was less to do with state of the art applications than it was appealing new devices. Nonetheless, year on year growth increased every quarter and analysts believe that valuable lessons have been learned.
“Consumers embraced a variety of innovative handsets, especially those with colour screens, rather than delaying replacement purchases because of an ongoing lack of compelling mobile data services,” said Bryan Prohm, senior analyst with the Mobile Communications Worldwide research group for Gartner Dataquest. “This is an encouraging trend, because as carriers and manufacturers determine how to better align devices with applications and services, the market may again prove stronger than expected during 2003.”
| Worldwide Mobile Terminal Sales Estimates | |||||
| 2001 | 2002 | ||||
| Company | Units (m) | Market Share (%) | Units (m) | Market Share (%) | Growth (%) |
| Nokia | 139.7 | 35.0 | 151.4 | 35.8 | 8.4 |
| Motorola | 59.1 | 14.8 | 64.6 | 15.3 | 9.4 |
| Samsung | 28.2 | 7.1 | 41.6 | 9.8 | 47.6 |
| Siemens | 29.8 | 7.4 | 34.6 | 8.2 | 16.4 |
| Sony Ericsson | 27.0 | 6.7 | 23.1 | 5.5 | -24.3 |
| Others | 115.9 | 29.0 | 107.9 | 25.5 | -6.8 |
| Total | 399.6 | 100.0 | 423.4 | 100.0 | 6.0 |
| Source: Gartner Dataquest, March 2003 | |||||
The upturn continues Growth has continued into 2003 with Gartner reporting a higher-than-expected 18% rise in handset sales for the first quarter. Separate figures from Strategy Analytics show an overall increase of 16% with GSM shipments up by 13% year on year.
It is anticipated that the increasing availability of colour screen and feature-packed phones will encourage more consumers in to upgrade their handsets. In particular, there are high hopes for camera phones which have proved popular in the Far East and are set to break into the European market.
The latest A.T. Kearney/Cambridge Mobinet study found that more than 80% of mobile phone users were aware of the photo messaging capabilities of modern handsets and two-thirds said they were willing to pay to use these services. The report suggests that there is a growing sense that photo messaging could be the first “breakout” capability of multimedia messaging services (MMS)
“The prospects for mobile data services seem to have turned the corner through a combination of greater phone capabilities, improved user experience and consumer comfort/confidence in using advanced phone features,” said L.C. Mitchell, vice president of A.T. Kearney.
Until now, SMS has been by far the most widely used mobile data application. It is estimated that some 366 billion SMS messages were sent worldwide in 2002 and the convenience and cheap cost of “texting” should ensure its popularity for the foreseeable future.
However, there is evidence that alternative data services are beginning to make progress. For the first time since June 2001, the Mobinet Index found an increase in the proportion of mobile phone users accessing the online features on their phones. More than one third of users said they had accessed the internet on their phone at least once in the last month, an increase of 25% since the last study in June 2002.
Moreover, forecasts from the media and technology consultancy Analysys show that global mobile messaging revenues will double to $69 billion by 2007, as a result of further growth of SMS text messaging and uptake of new services such MMS and instant messaging (IM).
Western Europe is predicted to account for over a third of this total ($25 billion) with Jupiter Research projecting that 31% of the population will have MMS-enabled devices. However, just 21% of people in the region will qualify as active users.
Outlook While there is reason to be upbeat about the state of the mobile industry, optimism should be tempered with caution. Asia-Pacific remains a key market and the worldwide growth seen in Q1 may prove unsustainable given the inventory shortage in China and the knock-on effect of the severe acute respiratory syndrome (Sars).
Motorola, the world’s second largest handset manufacturer has already lowered its forecasts for the second quarter because of a slowdown in Asia and the market leader Nokia warned today that its own sales had been hit by a weak dollar, a sluggish economy and the Sars virus.
Strategy Analytics predicts that global handset sales will grow 5% this year to 458.4 million units and 11% in 2004 to 506.9 million units. However, the proportion of high-end, multifunctional devices is likely to remain to low.
This will come as a disappointment to European mobile operators who have failed to convince the public of the merits of WAP and admit to overspending on 3G licences. In response to this, Lehman Brothers has reduced its short term mobile revenue growth forecasts from 7% to 5%.
| European Mobile Market Growth Forecasts (%) | ||||||||||
| 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 02-05 CAGR | |
| Previous | 12.3 | 8.1 | 6.3 | 5.8 | 5.4 | 5.0 | 4.5 | 4.3 | 3.6 | 7 |
| New | 12.4 | 6.9 | 4.5 | 4.4 | 4.3 | 4.0 | 3.9 | 3.5 | 3.1 | 5 |
| Source: Lehman Brothers, June 2003 | ||||||||||