MUMBAI: Across the globe handset vendors and operators are finding it increasingly challenging to grow and carve out market share.
With key prosperous markets reaching high penetration levels and vendors that have previously focussed on specific regions now pursuing global expansion strategies, a much reduced growth rate is predicted from 2008.
Market research group Informa Telecoms & Media will put a report on the same next month. Handset sales forecast to reach 899 million by 2010, from their 2005 level of 743 million. Handset manufacturers will look to new features and supported services to rekindle growth over the next five years, with music player and mobile TV providing huge revenue-earning potential. Digital media broadcasting receivers on handsets could be of the greatest significance.
These will enable users to not only receive digital audio but also watch broadcast video or terrestrial digital TV, igniting an effective and powerful media combination with mobile communications. Mobile subscribers worldwide totalled 1.59 billion last year with expectations for 2005 of 1.94 billion, a year-on-year increase of 20.5 per cent. Driven by the ever-expanding Asian markets, China is the world's single largest market in terms of subscribers, accounting for more than one-in-five of all subscribers worldwide at the end of 2004. The next milestone - the 2 billion subscriber mark - is expected to be surpassed sometime in 2006.
India is another key market: The number of mobile phones users has risen year on year and it is expected that by 2010 there will be over 2.7 billion mobile users globally. The main drive for this growth will come from countries such as India and China in the Asia Pacific region and by 2010 the region will contribute almost half of the mobile subscribers globally as subscribers rise from 843 million in 2005 to 1.3 billion.
The vast majority of subscribers worldwide were still on 2G networks in 2004, representing 83.6 per cent of total. Analogue subscribers are slowly petering out since reaching a peak of just fewer than 100 million in 1997, forming only 0.6 per cent of all subscribers in 2004 with the vast majority of these using AMPS. The US has the largest analogue market. These are forecast to be negligible by 2010 as many operators either migrate subscribers to digital networks or switch off analogue networks completely.
By 2010, subscribers to 2G technologies will still hold top share (46.5 per cent), followed by 2.5G (29.6 per cent). By this stage, though, the 3G subscriber base will have reached almost 23.8 per cent of total as full migration to these networks starts to take affect in developed regions.
Handset Market Trends and Outlook: Low-end, entry-level products for emerging markets will play a key role in generating revenues since the second billion subscribers will be totally different from the first in terms of consumer expenditure and poverty levels. They have also shown their worth in more mature markets as particular customer segments have been identified that require simple, easy to use devices.
This market focus on the low-end could, however, have a severe impact on the longer term dynamics of the industry. Specifically, the low-end gives lower margins and this will put further pressure on vendor margins and revenue expectations, which in the longer run may ultimately determine their survival in the market.
Handset Features: Progress in the global mobile handset market and continuing improvements in wireless networks is encouraging a shift from mainly voice-centric to data-centric devices. It is new features and capabilities that are ostensibly driving the handset market, notably the replacement handset market, but they will also increasingly support and exploit the potential of next generation data networks, including 3G services and beyond. 3G services have blossomed worldwide because of the availability of good, well-featured handsets.
Consequently handsets currently being manufactured are incorporating a variety of features from email capability and colour screens, to integrated cameras, MP3 players and Bluetooth.
Looking ahead, voice services are still the primary use by subscribers, and voice applications using data such as the push-to-talk "walkie-talkie" -type service may become a ubiquitous feature in devices, notably in developing regions where it is seen as a cheaper alternative to voice and as a possible replacement for SMS in areas of low literacy. This may then pave the way to full voice-over-IP services despite expected intervention by the operators. While messaging will continue to be an important part of the consumer market in the future, entertainment will become an increasingly influential factor on the device particularly as networks develop.
The onset of multimedia messaging, in tandem with colour screens, has now pushed the mass-market arrival of camera handsets in most markets worldwide despite usage of the actual service itself being relatively low. There is massive potential for integrated camera phones as Informa Telecoms & Media estimates that 301 million will be sold in 2005, with 3G providing a huge boost to imaging devices. By 2010 around 691 million integrated camera phones will be sold worldwide, with many being also capable of mobile video. Indeed, video download and video streaming are both proving popular in some markets, despite the fact that it was video telephony and video messaging that were touted as the few true differentiators for 3G networks.
Other advances in handset features surround those with music and media capabilities. Polyphonic sound is starting to become a common feature of handsets and, in the medium term, a larger number will incorporate MP3 storage and playback. Additionally, as 3G networks reach greater penetration, downloading music files to the handset and their transfer to different devices through Bluetooth and USB connections, most evident from the agreement between Motorola and Apple for its iTunes device and service, or possibly wireless LAN, will become popular as will high quality audio streaming. The integration of analogue FM radio has appeared on some handset models, but it is the potential for digital media broadcasting receivers on handsets that could be of greatest significance.
Two particular systems - digital multimedia broadcast (DMB) and digital video broadcast for handhelds (DVB-H) - are in service or being trialled around the world.Wireless broadband applications such as high resolution multimedia streaming, video downloads, advanced interactive gaming, and TV broadcasting require powerful devices with sophisticated computing performance and good battery life. To enhance the end-user experience and to make good use of wireless broadband services, mobile devices will have to feature high processing speeds, large RAM memories, high resolution wide displays and large storage capacities.
Informa Telecoms & Media senior analyst, and principal author of the report, Dave McQueen, said, "The mobile market has developed substantially over the last 18 months, particularly with the eventual take off of 3G networks in Europe and in North America following the lead taken by Japan and Korea. The migration from 2G to 3G is likely to be accompanied by dramatic changes in the industry value chain, with the mobile handset community increasingly shifting its focus from voice to data services support.
"These new trends are changing the industry landscape and creating many new and exciting investment opportunities. To stay ahead, leading players need to differentiate their products by means of new technologies. Standards, alliances and partnerships also need to be created throughout the technology value chain, to ensure that technology diversity does not result in unwanted market fragmentation."
