a week in wireless

Livin’ on a prayer

The Informer doesn’t know about you, but he recalls the 1980s with a shudder. We can’t tar everything with the same brush, of course, some good stuff did happen. But generally, it was a nasty decade. The haircuts were awful, the clothes were terrible. Much of the music was downright offensive. This week one of the icons of 80s pop culture, ‘Boy’ George O’Dowd, was sent to prison and the Informer rather thinks that’s what should happen to the 80s as a whole. They should be locked up and forgotten.

But the Informer rarely gets his way and the 1980s – as decades are wont to do in the fickle world of fashion – has come back around. There is one small upside, which is that he can now say things like “Huh. I remember day-glo legwarmers from the first time they round” to his achingly hip and aloof teenaged cousins, who simply stare at him as if he’s the least cool person in the world. This is scant consolation, however.

The 80s are back – recession and all – and their pernicious influence is evident everywhere, even in mobile phone design. The Informer knows this because the Nokia 5800 ‘Tube’ – the Finn’s first touchscreen handset – has been launched today. It’s a special day at the flagship Nokia store in London, past which the Informer shuffled on his way to work this morning. The shop sits bang opposite the flagship Apple store, the two glass-fronted, tech-boutiques staring one another down across Regent Street.

The Informer’s just got his hands on a Tube from Nokia for assessment but he hasn’t had a go on it yet because he’s busy writing this very weekly round-up. Just from the look of the thing, though, which features the definitive 80s colour combo of black and red, and the body-poppers in the Nokia store heralding its arrival, you can see that the Finns are trying to ride the revivalist wave. We’ll let you know what we think of the phone next week but, the Informer has to tell you, the pavement outside the Nokia store was not a-throng in the way the Apple store was when the iPhone landed.

Nokia Tube launch

The firm probably has high hopes for the Tube as, despite its robust leadership of the handset market, it has not escaped unscathed from the credit crunch. Nokia is the latest big vendor to report disappointing handset shipments for Q408, with the total dropping 15 per cent year on year to 113.1 million, and falling from 117.8 million shipments in the third quarter of 2008.

That’s the first time in a long time that the pre-Christmas period has yielded less sales for Nokia than the preceding quarter. Hard times indeed.

Overall, fourth quarter net sales at the firm were down 19.5 per cent year on year to Eur12.6bn, with full year revenues coming in almost flat compared to 2007, at Eur50bn. Net profit for the fourth quarter totalled Eur576m, down from Eur1.8bn in the same period a year earlier.

The company estimated that its mobile device market share dropped to 37 per cent in Q4, down from 40 per cent in Q4 2007 and down from 38 per cent in Q3 2008. The average selling price (ASP) of a device held fast held fast however, at Eur71, down from Eur72 in the third quarter 2008.

Nokia now expects 2009 industry mobile device volumes to decline approximately ten per cent from 2008 levels, with a greater decline in the first half than in the second half of the year.

Motorola and Sony Ericsson also reported a sequential decrease for Q4 handset sales last week, making it look likely that the entire handset sector will have dropped off from Q3. Hell, even the iPhone couldn’t buck the trend. Apple shifted 4.3 million 3G iPhones in the fourth quarter of 2008, up 88 per cent year on year but down from 6.9 million in the previous quarter.

In Korea, the handset business units of national powerhouses Samsung and LG haven’t fared so badly – at least in relative terms. While Samsung posted its first-ever quarterly loss (4Q 2008), due to a slump in demand for its semi-conductors and flat-panel plasma screens, the handset division was a bright spot. It managed an operating profit of Won160bn, despite Samsung’s observation that the global handset market had contracted five per cent, quarter-on-quarter, during 4Q 2008. Moreover, it managed to sell 22 per cent more mobile phones last year compared with 2007. The handset downside for Samsung is that 4Q 2008 margins dropped to 2 per cent from the 7 percent during the previous quarter as result of rising marketing costs. Samsung plans to offer more low-end models, according to report in the UK’s Financial Times, to shore-up its handset portfolio.

LG, also on the back foot due to a fall in prices for its flat-screen TVs, posted its first net loss in seven straight quarters during 4Q 2008. However, it managed eight per cent increase in shipments of mobile phones to 25.7 million. Its 2008 handset sales of 100.7 million is a record for the company, up from 80.5 million in 2007.
This week the Informer spoke to Gartner‘s handset market guru, Carolina Milanesi who had some bad news for Motorola, predicting that the US vendor will have dropped out of the top five handset rankings by the end of the year. Sony Ericsson’s hold on third place looks tenuous at best.

Motorola lags the leading pack in key areas such as software and user interface, Milanesi said. This, combined with a shift in geographical focus away from EMEA will cost the firm shipment numbers and an expected push from RIM could contribute to a relegation for a manufacturer that once led the world in handset sales.

Sony Ericsson, meanwhile, could be penalised by its reliance on Western European markets, which Gartner expects to remain flat this year.

The handset sector is under intense pressure from consumers reining in their spend and operators looking to slash costs wherever they can. In mature markets the trend over the past two years has been for operators to tie postpay users into longer contracts, either 18 or 24 months. This is slowing the replacement cycle in these markets, particularly as operators are now withholding mid-term upgrade incentives.

In the developing markets to which handset vendors are looking for shipment growth, the upgrade cycle they’ve been waiting for is not forthcoming, said Milanesi. “This year the great hope was that people in emerging markets that had become subscribers in the last couple of years would now start replacing their handsets. It was not believed they would spend large sums of money but, if they had a $25 – 30 phone as a first phone then maybe they would upgrade to a $50 – 60 phone with a colour screen or VGA camera. And this is not actually happening,” she said.

Pressures on the handset vendors may well impact on other sectors. Milanesi suggested that vendors will have to prioritise the functionality they build into their handsets based on what consumers are most likely to pay for and operators most willing to subsidise. “Adding a DBV-H tuner to a phone doesn’t help you in the market today, for example,” she said.

Things are no rosier in the world of infrastructure, where Nokia Siemens Networks reported that revenues fell 5.3 per cent year on year to Eur4.3bn in the fourth quarter. And it wasn’t alone in dishing out the gloom.

Swedish kit maker Ericsson actually performed better than expected, despite the fact that full year net income fell 48 per cent to SEK11.3bn. Earnings in the fourth quarter of 2008 took a negative hit of 31 per cent, dropping to SEK3.9bn. And the company pushed revenues for the year up by 11 per cent to SEK208.9bn, and also recorded a sales increase of 23 per cent in the fourth quarter.

That didn’t keep the redundancy fairy happy, though, and she waved her magic wand – or should that be scythe – over the heads of 5,000 Ericssonites. Many of these will be consultants and other temporary staff, and there will be consolidation of some R&D sites. Ericsson said about 1,000 of these job cuts would be in Sweden, primarily in Stockholm.

It’s probably not going to make these people feel any better but industry watchers are already suggesting that – for the health of the industry as a whole – the fall out from this credit crunch is necessary. “Ultimately it’s a good thing,” said Bengt Nordstrom, head of consultancy NorthStream when the Informer quizzed him this week. “In the infrastructure market we’re now really down to a game that can only sustain three players.

Gulp! Three players? If Northstrom is right, then a hard rain’s a-gonna fall on some fairly big name players before too long.

One firm looking to jettison some unnecessary baggage this week was silicon vendor AMD. US firm Qualcomm said Tuesday that it has acquired certain graphics and multimedia assets from AMD’s handheld business, paying $65m in cash and pledging to keep the staff into the bargain. The credit crunch probably isn’t much more than a nibble at Qualcomm.

The AMD technology looks like it will be folded in with Qualcomm’s mobile multimedia operation, which develops System on a Chip (SoC) technology under the Snapdragon moniker. The deal should also help Qualcomm out of certain licensing fees the company has been paying to AMD for several years.

Also splashing the cash this week was Bahraini carrier Batelco, which has chucked $225m at a 49 per cent stake in Indian mobile operator S Tel as part of a JV with Dubai’s Millennium Private Equity. Batelco and Millennium formed the Imaginatively named Batelco Millennium India Company for the caper.

S Tel recently established mobile operations in India, after obtaining spectrum to operate in six Category ‘C’ circles. Finalisation of the spectrum purchase is subject to preconditions but completion of the deal is expected by the end of the first quarter.

In other carrier M&A news KT (Korea Telecom) has finally said it will merge with its mobile operator subsidiary, KTF (Korea Telecom FreeTel). By bringing the two companies together (KT already owns 54.3 percent of KTF), more bundled offerings can be made, which many analysts see as essential for KT (the dominant fixed broadband player in South Korea) to compete more effectively in the country’s mature broadband marketplace.

SKT, South Korea’s number one mobile operator in terms of subscribers, has already acquired fixed broadband player Hanaro and so can provide quadruple-play services of its own. So too can the LG Group, the country’s third biggest telecom player, which also has both fixed and mobile networks at its disposal.

NTT DoCoMo, Japan’s leading mobile operator by subscribers, owns 10.7 per cent of KTF. KT says it will sell $253m bonds to NTT DoCoMo, exchangeable into stocks, as part of the merger plan. NTT DoCoMo is planning to transfer 60 per cent of its holding in KTF to KT.

And that’s about it, although the Informer would like to join Bono, Beyonce and Bruce Springsteen in welcoming Barack Obama to his new role. Obama, of course, will be keeping his Blackberry. The man’s clearly got some kind of thing for the letter ‘B’.

Take care

The Informer

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One comment

  1. Avatar David 23/01/2009 @ 3:33 pm

    Surely this week’s news was dominated by the unmasking of The Stig of Top Gear. Isn’t the Informer concerned about asking for his next photo opportunity?

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