Worldwide economic gloom continued to impact mobile phones sales in both mature and emerging markets during the second quarter of the year. And while the global mobile subscriber base continued to grow, there was also a marked slowdown in handset replacements, as the market was dragged down by the higher cost of living.

Industry analyst Gartner said this week that worldwide sales of mobile phones reached close to 305 million units in the second quarter, an 11.8 per cent increase over the same period last year.

But the shift in more cautious spending persisted, with consumers in mature markets continuing to favour cheaper mid-tier devices over high-end models. Replacement sales also remained weak in both mature and emerging markets, as consumers faced higher prices for fuel and food in addition to higher levels of inflation.

Second quarter sales in the Asia Pacific region increased 20.5 per cent year on year to 115 million units, although the weak economy meant that net new connections declined from more than 83 million in the first quarter to 75 million in the second quarter.

The story was similar in other developing regions, with sales in Eastern Europe, Middle East and Africa reaching 56 million, up 18 per cent, but with slower than expected replacement sales. Sales of handsets in Latin America topped 38.5 million, an increase of almost 19 per cent, but in the face of weaker than expected demand.

The market in Western Europe picked up slightly in the second quarter, with sales of handsets approaching 42 million, down 8.2 per cent year on year, but up 16 per cent quarter on quarter. Penetration in Western Europe hit 121.5 per cent, signifying a strong dependence on replacement sales, which will remain a challenge.

North American sales totalled 44.1 million, up 6.58 per cent year on year, where growth is actually dominated by replacement sales. While in Japan sales dropped 22.1 per cent year on year to 9.4 million, in face of extreme saturation and lack of compelling new products.

According to Gartner, Nokia widened its lead to 39.5 per cent global market share, with 120.4 million shipments in the second quarter, using strategic price cuts in its mid-tier portfolio to pressure competitors. Samsung also pushed sales up to 45.7 million, with a market share of 15.2 per cent, widening its lead over third placed Motorola.

Troubled Moto saw its market share drop 4.5 per cent year on year to 10 per cent, with mobile phone sales reaching 30.4 million units. With a lack of hot features like GPS in its range, the analyst believes Moto may have to slash prices to remain competitive.

Meanwhile, LG put the pressure on with a 2 per cent market share climb to reach 8.8 per cent and 26.7 million units. And Sony Ericsson upped its game sequentially to reach 23 million shipments, but still lost 1.4 per cent market share, dropping to 7.5 per cent.

Carolina Milanesi, research director for mobile devices at Gartner, said a tougher economic environment is expected to continue negatively impact average selling prices, putting manufacturers under pressure to maintain healthy margins while breaking into emerging markets to increase sales.

Despite this, Gartner remains positive that mobile phone sales in 2008 will reach 1.28 billion units.