At the 3GSM event, manufacturers are expected to show their latest products, ranging from high-end music enabled wireless handsets and smart phones that are designed to appeal to sophisticated users in developed regions, to Ultra Low-Cost Handsets (ULCHs) that are targeted at low-income users in the third world.
These products can counteract the impact of the subscriber slowdown by drumming up new revenue streams and by attracting new customers that previously couldn't afford mobile phones. Regardless, iSuppli asks the loaded question, will these efforts be enough to maintain growth in mobile phone hardware and service revenues?
After rising by an average of 25 percent in 2004, 2005 and 2006, global mobile phone subscriber growth will decelerate to 12.8 percent in 2007, according to iSuppli. The slowdown will continue during the following years, with subscriber growth dropping to 9.6 percent in 2008, to 7 percent in 2009 and to 5.7 percent in 2010.
In parallel with the slowdown in subscriber gains is a major drop-off in production growth for mobile phones. In 2004, 2005 and 2006, mobile phone unit production grew by an average of 19.3 percent. In 2007, the growth will slow to a mere 9.1 percent, followed by 6.9 percent in 2008, 4.8 percent in 2009 and 3 percent in 2010.
"The slowdown in new subscriber growth and the deceleration in mobile phone sales translates directly into deteriorating market conditions for wireless carriers," said Dr. Jagdish Rebello, director and principal analyst for iSuppli. "Carriers and their mobile phone suppliers need new strategies to counter the impact of this phenomenon."
With fewer new subscribers to be found worldwide, carriers need to focus on squeezing more revenue out of their existing customers in developed regions. One way to boost the Average Revenue Per User (ARPU) is to offer enhanced services that subscribers are willing to pay for.
In pursuit of this goal, wireless carriers are offering services including Internet access, mobile television and music playback capability, all of which command a higher ARPU than basic voice communications.
By 2010, the market for mobile phone content, including music, video and gaming will expand to nearly $36 billion, up from $7.7 billion in 2005, according to iSuppli's Mobile Multimedia Content service.
However, even new mobile content services are in a constant state of flux, with ring-tones already having peaked, ring-back tones gaining momentum, and mobile TV services just debuting worldwide.
Applications such as digital imaging, mobile TV, video and audio streaming, music downloads and interactive gaming are imposing significant changes on mobile phone design, requiring higher resolution displays, more powerful processing, increased memory densities, removable flashcards and local interfaces to connect to PCs, such as USB.
Carriers that can marry compelling content and services to affordable yet attractive hardware stand to increase their ARPU and counteract the impact of slowing subscriber growth. Frankly, the problem in the U.S. market may simply be consumer education regarding applications.
We know from recent market studies that few people know how to activate and use even the most basic features of their current phones. I still encounter situations where friends and associates are unclear about the available applications, and therefore even 2G phone/service capabilities are grossly underutilized.