While wireless handset sales worldwide are expected to continue to climb during the next several years, those sales are expected to be driven more by replacement handsets purchased by current wireless customers than handsets purchased by new wireless customers, according to a report from UBS Warburg.
In its report, “Global Mobile Handset Quarterly Review,” UBS Warburg noted that while it expects handsets sales to grow from 390 million this year to 500 million by 2003, the percentage of those sales coming from current wireless subscribers is expected to drop from nearly 60 percent this year to less than 40 percent in the next couple of years.
“Secular growth as the main driver of this industry is over,” said Jeffrey Schlesinger, wireless equipment analyst at UBS Warburg. “Future growth will have to be based on new product cycles, namely new applications.”
Schlesinger was quick to point out that those applications had to be more compelling than just rolling out next-generation networks. Handset vendors and wireless operators need to work together developing multimedia services, color displays, new hardware platforms and user interfaces to keep customers coming back for new handsets and services.
The report noted handset sales from net customer additions are expected to fall from around 60 percent of total handset sales this year to less than 40 percent by 2003, driven by the continued saturation of potential worldwide subscribers.
Commenting on next-generation wireless handsets, UBS Warburg predicts of the 390 million handsets expected to be sold this year, less than 3 percent will be GPRS or 1xRTT enabled. That number is expected to climb to around 20 percent of the 430 million handsets sold next year, and 30 percent of the 500 million handsets predicted to be sold in 2003.
Collette Fleming, wireless service analyst for UBS Warburg, noted CDMA operators in the United States are expected to begin aggressively marketing 1xRTT handsets next year, initially for the voice capacity enhancements the technology is expected to provide.
Nokia continued its commanding lead as the biggest wireless handset vendor worldwide during the third quarter, though its area of dominance shifted away from its core GSM/TDMA handsets to the faster expanding CDMA handset market.
Nokia’s lead in the GSM market, which accounted for nearly 70 percent of all handsets sold during the third quarter, shrank from 46 percent the previous quarter to 43 percent during the third quarter.
Motorola Inc. and L.M. Ericsson, the other two carriers making up the “Big 3,” both showed little gains in the GSM market, with Motorola losing 2 percent of its market share to 17 percent and Ericsson remaining stable at 10 percent. The biggest gainers appeared to be smaller vendors grouped under the “other” heading, which saw their share of the GSM market rise from 2 percent to 13 percent.
Nokia saw a bigger drop in the TDMA market, where its share dropped from 66 percent during the second quarter to 57 percent. Ericsson and Motorola also posted no gain or a slight loss, with Ericsson’s share falling from 22 percent to 19 percent and Motorola holding steady at 9 percent.
The TDMA market also posted a near 10-percent decline in year-over-year growth, with handset sales falling from 14 million last year to 11.5 million this year, a trend UBS Warburg said it expects to continue.
“We expect TDMA to show minimal growth during the coming years due to GSM overlays in the Americas,” Schlesinger said.
The bright spot for the industry was CDMA handsets, which saw their numbers increase slightly from the previous year. Nokia made the biggest moves in the CDMA segment, nearly doubling its market share from 7 percent to 13 percent. Nokia’s growth appeared to come at the expense of smaller vendors grouped under the “other” category, whose market share dropped from 36 percent during the second quarter to 26 percent during the third quarter.
Others posting gains in the CDMA market were Motorola, climbing 1 percent to 25 percent of the market, and Audiovox, rising 3 percent to 13 percent. Korea’s Samsung remained at 23 percent.
Noting vendors had to stay on top of introducing new products to keep moving handsets, Schlesinger viewed Nokia as the best positioned heading into new product cycles, while Motorola would also benefit in terms of profitability, though it would see minimal gains in market share.
