Downturn reveals regional divide in mobile market

There is evidence of a strong regional divide emerging through the impact of the economic downturn, according to analysts this week. parent and industry analyst Informa Telecoms & Media noted that new subscriptions in the emerging markets of Africa and south Asia continue to drive growth, while the flagging mobile device market should also remain resilient in these regions, albeit with users buying basic and low feature handsets.

During 2008, India became the world’s largest market in terms of net additions for the first time with 102 million new mobile subscriptions over the 12 month period, ahead of China. But Nick Jotischky, principal analyst for emerging markets at Informa does have a warning for those investors looking to escape the saturation of developed markets: “India and other emerging markets have their own difficulties as mobile operators continue to work out how they can deliver profitability in the face of increasingly brutal competition,” he said.

Until now, mobile operators have not been substantially impacted by the deterioration of the economic environment and have shown impressive resilience, according to senior analyst at Informa, Dario Talmesio. “Contingency plans are being prepared for the year ahead with many operators preparing to lower cost bases and downsize their business. Handset and network vendors will be affected more than mobile operators in the first instance as the number of consumers choosing not to upgrade devices will increase. 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,” Talmesio said.

But on a global scale, Informa’s research suggests that the ongoing financial crisis started to make an impact on the mobile telecoms sector during the second half of 2008, and is likely to worsen during 2009.

The world’s mobile subscription market grew by 18.5 per cent year on year in 2008, down from 22.5 per cent growth in 2007, and is set to increase by just 12.7 per cent this year. However, Informa does note that this reduction in growth is partly due to the effect of natural market development, particularly in Western Europe and USA.

But of more concern to the industry is the 7 per cent fall estimated by Informa in the handset replacement market in 2008. Unsurprisingly, the world’s developed markets will be hit especially hard with the total device market in Western Europe set to contract by 13 per cent in 2009, and it could take as long as three years for the device market to get back to 2008 sales levels.

“The handset market is facing a difficult period with the average replacement cycle likely to increase by 6-8 months in 2009, which would result in a 5 per cent year on year decline in the number of total devices sold globally to 1.16bn”, said senior forecasting analyst at Informa, Nidhir Maudgalya. “And things could get even worse than this, as depending on the extent of the deterioration of global macroeconomic conditions, the year on year fall in the number of total devices sold could double to 10 per cent with replacement cycles increasing to up to 12 months.”

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