Belt-tightening ahead for mobile handset makers

Goodbye good times...
Written by Natasha Lomas, Contributor

Goodbye good times...

Mobile handset makers can kiss goodbye to the kind of gut-busting global growth they have enjoyed in previous years.

According to Informa Telecoms & Media's latest Future Mobile Handsets report, 2006 will be the last year for massive worldwide growth in handset sales as saturated developed markets temper the growth from emerging regions such as China, India and Latin America where phones are still flying off the shelves. Starting in 2007 the analyst expects growth in handset sales will slow dramatically.

Even so, Informa predicts the number of handsets shipped globally will rise from 814.4 million at the end of 2005 to 1.255 billion by 2011.

Dave McQueen, principal analyst at Informa, warned handset makers are in for some belt-tightening as they struggle to shift the same quantities of handsets as before, and profitability suffers. Although growth in developing regions is "impressive", McQueen said in a statement "we are not seeing the same levels of phone take-up [there] per capita".

It's a tale of two economies - with mobile sales in developed regions largely restricted to bells-and-whistles upgrades, while emerging regions are still dealing in low-cost, entry-level handsets and enjoying large increases in mobile subscribers.

According to Informa, functionality is a key consideration for handset makers in the looming war against saturation - as novelty replaces necessity. This means music and mobile TV are the next big battlegrounds for vendors.

The research company predicts the number of handsets sold with music capabilities will leap from 69.8 million in 2005 to 126.1 million in 2006 - an 80 per cent increase. By 2011, it anticipates 55 per cent of all handsets sold will be able to play music, while a more modest 9.6 per cent will be kitted out for mobile TV.

The UK's first broadcast mobile TV service went live this month - courtesy of Virgin Mobile. The big players are not hanging back when it comes to mobile music either: back in August, Nokia announced it was buying digital music distributor Loudeye for $60m, while last month Sony Ericsson revealed plans to launch a music download service called M-Buzz.

Consolidation in the handset space is likely, Informa suggests, as competition hots up, the lifespan of handsets decreases and low profit margins bite.

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