News From Telecom World

Mobile market to take hit in 2009

Posted on: November 11, 2008

A wave of economic gloom is expected to hit mobile phone buyers next year, and more and more analysts predict the once-buoyant market will shrink for the first time since the 2001 crash, a Reuters poll shows.

On average, analysts expect global growth to be 3 percent in both the fourth quarter and in 2009, compared with well above 10 percent in recent years. Eight out of 22 analysts said they expected the market to contract next year.

In a similar poll just a month ago, only one analyst out of 23 expected 2009 market sales volumes to fall, and then only slightly.

For the fourth quarter, analysts expect the market to grow 11.6 percent from the third quarter, less than the 13.5 percent estimated by Nokia, the world’s largest cellphone maker. The fourth quarter has traditionally been a bonanza for cellphone makers as consumers snap up phones for holiday gifts.

The $190 billion cellphone market, which was born in the 1980s and became a major growth industry after a surge in the late 1990s, had a brief shock in 2001, when the market fell for the only time.

Cellphone makers have prepared themselves for the market slowdown over the past several months, avoiding the build-up of large inventories that hurt the market in 2001. Also, some distributors have been held back from building up phone inventories because of the credit crisis, analysts said.

The first indications of future demand, however, are not promising. Qualcomm, which makes chips for wireless devices, issued a disappointing profit outlook for the current quarter and year ahead Thursday, indicating that the economic crisis could have a prolonged effect on cellphone demand.

Paul Jacobs, the company chief executive, said the credit crisis and economic uncertainty meant sales of wireless gadgets would probably be slower in 2009 than previously expected, adding he saw a “significant contraction” in customers’ inventory in the first two quarters.

Analysts said cellphone makers might feel more pain this time around. When the market crashed in 2001, replacement sales tumbled but sales to first subscribers continued to grow because of the low penetration of cellphones.

The European market, where almost everybody has a phone and margins are fatter, thanks to higher sales of technologically advanced phones, is set to fall already this year and analysts say this trend is likely to continue next year.

“My fear is that, depending on the global economic situation, the downturn could be more prolonged than it was in 2001,” said Geoff Blaber, analyst with research firm CCS Insight.

“Emerging markets account for a significant amount of growth, so a lot will depend on the cost of commodities and how significantly the total cost for mobile phone ownership declines.”

Sales volume in emerging markets surpassed that in developed markets in 2005, and this year about two-thirds of sales are in emerging markets.

Source: International Herald Tribune

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