Wireless Industry Faces Slowing Growth

[jones]

After Boom Years, Wireless Industry Faces Slowing Growth

ISuppli predicts global mobile phone subscriber growth will decelerate to 12.8% in 2007, down from average annual growth rates of 25% the past three years.


By W. David Gardner, InformationWeek
Feb. 12, 2007
URL: http://www.informationweek.com/story...leID=197005460



The vendors and participants at the 3GSM World Congress in Barcelona, Spain, this week may be unveiling a wide range of new mobile phone-based products and services, but their biggest challenge isn't the competition -- it's the fact that wireless growth is poised to slow dramatically.

Market research firm iSuppli said that even the latest smartphones aimed at developed markets and ultrainexpensive phones aimed at the Third World and developing nations won't halt the decline in subscriber growth and the growth of phone sales.

"The slowdown in new subscriber growth and the deceleration in mobile-phone sales translates directly into deteriorating market conditions for wireless carriers," said Dr. Jagdish Rebello, iSuppli's director and principal analyst, in a statement.

The market research firm predicted that global mobile phone subscriber growth will decelerate to 12.8% in 2007, from average growth rates of 25% in 2004, 2005, and 2006. The decline is expected to continue in subsequent years, dropping to 9.6% in 2008, 7% in 2009, and 5.7% in 2010.

As expected, the manufacture and sales of mobile phones is likely to track subscriber growth, according to the iSuppli report, which was announced to coincide with the Barcelona event. The firm forecast a mobile phone production growth rate of 9.1%, down from the average growth rate of 19.3% for the preceding three years. Production rates are expected to continue to decline to 6.9% in 2008, 4.8% in 2009, and 3% in 2010.

"Carriers and their mobile phone suppliers need new strategies to counter the impact of this phenomenon," said Rebello.

To stimulate growth, iSuppli suggests that wireless carriers provide a new range of advanced services like Web access and music and TV playback for users in advanced industrialized nations. The market research firm suggests that ultralow-cost handsets can stimulate growth in Latin America, China, Africa, the Middle East, Australia, and India.

"For India and other developing regions, the next phase of growth will be driven by low-end phones," said Rebello, who noted that India in particular could enjoy rapid handset growth. Cell phone penetration in India is just 13.5% in 2007, iSuppli said, while the predicted penetration will rise to 31.5% in India in 2010.

[Fire14]

So what is their basis for the slowdown?
What exactly does "deteriorating market conditions for wireless carriers" mean?

Market saturation? Cost's of services getting too expensive?

[dmapr]

Originally Posted by Fire14

So what is their basis for the slowdown?
What exactly does "deteriorating market conditions for wireless carriers" mean?

Market saturation? Cost's of services getting too expensive?

My guess would be market saturation is the #1 reason. The population doesn't grow as fast as the industry used to grow

[hf1khal]

Originally Posted by dmapr

My guess would be market saturation is the #1 reason. The population doesn't grow as fast as the industry used to grow

Well I still don't beleive in their assesments. There is more than 100 million and more (hold outs) in the US that still do not have cell phones. The market might be in the advanced to get more from current users but the no cell users still need to be enticed to join and I wonder how they will entice those.

[dmapr]

Originally Posted by hf1khal

Well I still don't beleive in their assesments. There is more than 100 million and more (hold outs) in the US that still do not have cell phones. The market might be in the advanced to get more from current users but the no cell users still need to be enticed to join and I wonder how they will entice those.

Actually, one could say that you're arguing their point -- having to sell to people who have held out for as long as those 100 million have does not make for a blossoming market.

[hf1khal]

Originally Posted by dmapr

Actually, one could say that you're arguing their point -- having to sell to people who have held out for as long as those 100 million have does not make for a blossoming market.

Not if they entice them with some sweet deal like better minutes for the $ and better over all packages.

[Fire14]

Originally Posted by hf1khal

Not if they entice them with some sweet deal like better minutes for the $ and better over all packages.

Well if there is a slowdown, then we as consumers may benefit by them offering better plans & packages. So we should hope the analysis is right.

[dmapr]

Originally Posted by hf1khal

Not if they entice them with some sweet deal like better minutes for the $ and better over all packages.

Obviously we'd have to see the demographics on the holdouts (as well as the geographical locations) to be able to determine that but I would hazard a guess that the current pricing structure that the major carriers have is much less flexible from the market point of view than a couple of years ago and if those people held out when there were many more deals to choose from, they'd probably be even less thrilled now. Having to sweeten the deal like you say would again be considered as deterioration of market.

I guess my point is that deterioration of market encompasses a lot more and if the margins have to shrink in order to continue the same growth rate, that would be considered deterioration as well.

[hf1khal]

Originally Posted by dmapr

Obviously we'd have to see the demographics on the holdouts (as well as the geographical locations) to be able to determine that but I would hazard a guess that the current pricing structure that the major carriers have is much less flexible from the market point of view than a couple of years ago and if those people held out when there were many more deals to choose from, they'd probably be even less thrilled now. Having to sweeten the deal like you say would again be considered as deterioration of market.

I guess my point is that deterioration of market encompasses a lot more and if the margins have to shrink in order to continue the same growth rate, that would be considered deterioration as well.

I am not diagreeing with you. I am just looking at what happened in other markets where they got so saturated that they had no way but to sweeten teh deals to bring in customers from other providers and to bring in the hold outs. The remaining, well i would say that tehy are the ones that are outside the major cities (in real rural areas). But in reality we will not see any shift in plan rates right now or the next year or so and will only see the the added features grow and them hoping to add more to their APRU and if it is priced right, then it could become a good thing for teh providers. But if we look at what is going on and that every thing has its own cost one can end up runing a $40 bill to as much as $100 and I realy wonder how much of the current subscriber base can afford to go that high or is even willing to do so in an age where many are being very carefull and cutting their costs as much as they can.

[Fire14]

Originally Posted by hf1khal

I am not diagreeing with you. I am just looking at what happened in other markets where they got so saturated that they had no way but to sweeten teh deals to bring in customers from other providers and to bring in the hold outs. The remaining, well i would say that tehy are the ones that are outside the major cities (in real rural areas). But in reality we will not see any shift in plan rates right now or the next year or so and will only see the the added features grow and them hoping to add more to their APRU and if it is priced right, then it could become a good thing for teh providers. But if we look at what is going on and that every thing has its own cost one can end up runing a $40 bill to as much as $100 and I realy wonder how much of the current subscriber base can afford to go that high or is even willing to do so in an age where many are being very carefull and cutting their costs as much as they can.

I believe it's going to become more of an issue for people not being able to afford higher bills for cell phones as other prices and taxes keep going up.

To the majority of the people, cell phones are an option and not needed, so it's one of the items people will cancel to save money it's cheaper to pay $175.00 ETF then pay over $100.00 a month for the bill.

If that were to start happening, then you will see the carrriers scramble.

[dmapr]

Originally Posted by hf1khal

I am not diagreeing with you. I am just looking at what happened in other markets where they got so saturated that they had no way but to sweeten teh deals to bring in customers from other providers and to bring in the hold outs. The remaining, well i would say that tehy are the ones that are outside the major cities (in real rural areas). But in reality we will not see any shift in plan rates right now or the next year or so and will only see the the added features grow and them hoping to add more to their APRU and if it is priced right, then it could become a good thing for teh providers. But if we look at what is going on and that every thing has its own cost one can end up runing a $40 bill to as much as $100 and I realy wonder how much of the current subscriber base can afford to go that high or is even willing to do so in an age where many are being very carefull and cutting their costs as much as they can.

No, we're not in a disagreement, I was just pointing out that all the things you're mentioning can be considered a deterioration in the market, that's all, and that it is contrary to your disagreement with the article