Get Smart

By The Informer

So handset sales have taken a kicking, readers, with analyst firms Gartner and Ovum both vying this week to get their numbers in the news. Q1 shipments were down year on year by 8.6 per cent, Gartner said, to 269.1 million units. “There were some signs of a recovery in markets such as North America and China, but overall sales in the first quarter of 2009 registered the biggest quarter-on-quarter contraction since Gartner began monitoring the market on a quarterly basis in 2001,” said Carolina Milanesi, research director for mobile devices at Gartner.

At Ovum meanwhile, the number crunchers were not to be out-gloomed. Shipments in 2009 will be down globally by about 9.1 per cent, the firm said, as the downturn continues to grip like a pitbull. All regions are likely to suffer the effects of the credit crunch, and even those in emerging markets will be hit to some extent, said Ovum, which has spied some blue sky on the distant horizon. The firm anticipates that shipments will start to recover from 2010 onwards, although it will take until 2012 before global volumes are back to the level seen in 2008.

Both analyst houses reported an upturn in high end handset sales, though, with Gartner clocking a 12.7 per cent year on year increase for Q1 smartphone shipments to 36.4 million units. Market share for this sector of the handset market grew to 13.5 per cent from 11 per cent in Q108. Gartner said strong performance by Research In Motion (RIM) and Apple showed that services and applications are now instrumental to the success of the smartphone space.

Ovum noted, meanwhile, that the credit crunch has hit the handset market squarely in the midriff, polarising demand at the low- and high end extremes.

In the overall global market, Nokia is still the Daddy, but its share dropped to 36.2 per cent from 39.1 per cent in the first quarter of 2008 by Gartner’s reckoning. Samsung retained second place and improved its market share to 19.1 per cent with sales totalling 51.4 million units. LG was in third with 9.9 per cent market share and there was some rare good news for Motorola, which after dropping to the fifth position in the fourth quarter of 2008, overtook Sony Ericsson to regain fourth place with 6.2 per cent share. Sony Ericsson – which is widely believed to be about to unveil its first Android handset – brought up the rear of the leading pack with 5.4 per cent of the market.

Nokia announced further job cuts this week, with 490 heads rolling as part of its ongoing weight loss programme. 170 bods from the logistics, production management and production support are being disappeared, while another voluntary redundancy programme had been announced that will last for the duration of June. This offer will be made available to 320 staffers at the manufactory in Salo, Finland.

Vodafone has been warming to a similar theme this week, announcing the acceleration of its own cost cutting programme in the wake of a dramatic drop in profits. It’s never good news when your net income halves, but at least in Vodafone’s case it still managed to bank more than £3bn for the financial year that ended March 31^st. It’s not as rosy as the £6.7bn it trousered the previous year but, in this climate – hell, in any climate – £3bn is a fair old wad.

Nonetheless, the firm is under pressure to improve its numbers and so it pledged on releasing its figures to kick its cuts up a gear. Vodafone announced a £1bn cost saving programme late last year and has now said it will deliver 65 per cent of that target within the next year.

Chief executive Vittorio Colao said that, in the more mature European and Central European operations, voice and messaging revenue declined due to lower growth in usage and continued price declines, while roaming revenue fell due to lower business and leisure travel. But the African and Indian markets remained robust driven by continued but lower GDP growth and increasing penetration.

European organic service revenues declined 1.7 per cent reflecting the economy and a strongly competitive environment. Impairment charges increased to £5.9bn, primarily in respect of Spain, which saw service revenue decline by 4.9 per cent on an organic basis, with an 8.6 per cent decline in the fourth quarter.

IDC research director, John Delaney, said that Vodafone is now reaping the fruits of some contentious decisions taken by its management in recent years. “Having resisted investor pressure to divest its stake in Verizon Wireless, Vodafone now benefits from the strong revenue and profit growth reported by the US operator following its acquisition of Alltel – and all in dollars too. Also benefiting the top line is Vodafone’s decision, three years ago, to extend its interests in emerging markets as a key objective of the operator’s corporate strategy.”

However, Delaney believes that the European mobile operators, Vodafone included, have more trouble ahead of them on the revenue front. “Today, the pain is in Spain – but it will be felt more widely over the coming year. The recession is set to hit people in the pocket throughout Europe, for at least the remainder of 2009,” the analyst said.

The group’s customer base has also exceeded the 300 million mark, with its proportionate customer base standing at 303 million at end March.

There may be pain in Spain, but for Zain there’s a gain. Shame it’s not in Bahrain. Instead it’s in Palestine, where the firm has taken a controlling stake in local operator Paltel. While Zain gets 56.53 per cent of Paltel, the Palestinian player gets 100 per cent of Zain Jordan. The mobile operation in Palestine, which currently operates under the Jawwal brand, will be rebranded to Zain by the end of 2009, and will also join Zain’s One Network roaming platform as the 19th participating country.

Meanwhile, over in Saudi Arabia, Zain’s been trialling HSPA+.

In other expansive news, Russian player Vimpelcom has – quite literally – made a beeline for Cambodia this week. Vimpelcom, which operates under the Beeline brand, launched mobile services in the South-east Asian market this week through its subsidiary Sotelco. The Russian player bagged a 90 per cent stake in Sotelco’s parent Atlas last summer, with the remaining ten per cent held by a local player.

During the first stage of the project, Beeline services will be available in the 11 largest provinces of Cambodia, covering 37 per cent of the country’s population. By the end of 2009, the company plans to provide coverage to territories that are home to more than two thirds of the country’s population.

In less successful M&A news, Egyptian carrier Orascom has spurned the advances of France Telecom once again, which is trying to table a satisfactory figure for the purchase of minor holdings in local mobile player Mobinil. The Egyptian regulator recently ruled that France Telecom should make an offer to buy all shares in Mobinil as part of its purchase of Orascom’s stake in ECMS, a holding company that owns 51 per cent of Mobinil.

The deal had been sweetened by France Telecom after its last attempt to carry out this move was scuppered by the Egyptian Capital Market Authority (CMA), which sided with Orascom and said the initial offer was not good enough. No details were given on how France Telecom increased its offer, but Orascom released a statement rejecting the deal.

Meanwhile reports have emerged from North Korea that a limited mobile service has been launched there on the network that is owned jointly by Orascom and the North Korean state.

“Here comes the Sun” George Harrison once sang, although he probably wasn’t making a prediction about the dawn of mobile application stores some 40 years hence. This week software firm Sun Microsystems unveiled plans for its own app store, saying it’s targeting some one billion users with Java enabled devices, covering mobile phones and PCs. And guess what: it’s called the Java Store.

“Candidate applications will be submitted via a simple web site, evaluated by Sun for safety and content, then presented under free or fee terms to the broad Java audience via our update mechanism,” said Jonathan Schwartz, CEO Sun. “Over time, developers will bid for position on our storefront, and the relationships won’t be exclusive (as they have been for search). As with other app stores, Sun will charge for distribution – but unlike other app stores, whose audiences are tiny, measured in the millions or tens of millions, ours will have what we estimate to be approximately a billion users. That’s clearly a lot of traffic, and will position the Java App Store as having just about the world’s largest audience.”

Them’s fightin’ words for the likes of Apple which, according to Strategy Analytics this week, took 12 per cent of the mobile application market in 2008. But, said SA, the Store’s value as a share of the market is less than its volume, given that there are so many free apps available.

While the original App Store’s favourable revenue share for developers has created a tremendous buzz and fostered innovation, resulting in a high volume of downloaded applications, the analyst said, competition between developers has become fierce as a result and the majority of applications are available for free or very low cost.

The price of success, eh?

Take care

The Informer