The ongoing financial crisis started to make an impact on the global mobile telecommunications sector during the second half of 2008, according to new research. The study, from Informa Telecoms & Media, forecasts a slowdown in the growth of global mobile subscription numbers, but the device market is likely to accelerate in 2009. The world’s mobile subscription market grew by 18.5% year-o-year in 2008 (down from 22.5% growth in 2007) and is set to increase by just 12.7% this year, although Informa does note that this reduction in growth is partly due to the effect of natural market development, particularly in Western Europe and USA.
Of more concern to the industry is the 7% 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% 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% y-o-y decline in the number of total devices sold globally to 1.16bn”, explains 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 y-o-y fall in the number of total devices sold could double to 10% with replacement cycles increasing to up to 12 months.”
Informa research suggests there is evidence of a strong regional divide on the impact of the economic downturn. New subscriptions in the emerging markets of Africa and south Asia continue to drive growth and the mobile device market should remain resilient, albeit with users buying basic and low feature handsets.
“India became the world’s largest market in terms of net additions in 2008 for the first time with 102mn new mobile subscriptions over the 12-month period, ahead of China,” notes Nick Jotischky, Principal Analyst for emerging markets at Informa. But Jotischky 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.”
Until now, mobile operators have not been substantially impacted by the deterioration of the economic environment and have shown impressive resilience. As senior analyst at Informa Dario Talmesio sums up, “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.”