The slowdown in the growth of global mobile subscription numbers and the device market is likely to accelerate in 2009. But what’s interesting is the Achilles Heel to blame: upgrades.
Conventional wisdom is that a thirst for data applications will drive consumers to trade in their feature phones for higher end smartphones, nicely priced in the $200-range to buck the recession issue. But research from Informa Telecoms & Media says we’ll see a 7 percent fall in the handset replacement market.
The world's mobile subscription market grew by 18.5 percent year-over-year in 2008 (down from 22.5 percent growth in 2007) and is set to increase by just 12.7 percent this year, although Informa does note that this reduction in growth is partly due to the effect of natural market development, particularly in Western Europe and the United States.
"The handset market is facing a difficult period with the average replacement cycle likely to increase by six to eight months in 2009, which would result in a 5 percent year-over-year decline in the number of total devices sold globally, to 1.16 billion,” explained senior forecasting analyst at Informa, Nidhir Maudgalya.
And things could get even worse: “Depending on the extent of the deterioration of global macroeconomic conditions, the year-over-year fall in the number of total devices sold could double to 10 percent with replacement cycles increasing to up to 12 months," Maudgalya continued.
Hardest hit will be Western Europe and the United States, with the former set to contract by 13 percent this year. And it could take as long as three years for the device market to get back to 2008 sales levels.
“Handset and network vendors will be affected more than mobile operators ... as the number of consumers choosing not to upgrade devices will increase,” said senior analyst at Informa, Dario Talmesio. “This will place an indirect hit on network investments as growth in data usage is not as sustained as expected leading to less-than-expected pressure on networks and operators electing not to upgrade networks."
It’s not all bad news: Meanwhile new subscriptions in the emerging markets of Africa and South Asia continue to drive growth and the mobile device market should remain resilient, albeit with users buying basic and low feature handsets.
"India became the world's largest market in terms of net additions in 2008 for the first time with 102 million new mobile subscriptions over the 12-month period, ahead of China," noted Nick Jotischky, principal analyst for emerging markets at Informa.
