Wednesday, November 09, 2005

A Couple of Q&As About Mobile Growth and Usage

IT Business Edge asks three questions to Neil Strother at NPD Group about the firm's recent survey that put handset sales growth between the second and third quarters at 7 percent. Strother's answers to the last two questions offer up some interesting factoids:

Question: What overall dynamic do you see?

Strother: We have 200 million out of 300 million people with cell phones. That number continues to rise. The penetration rate is in the mid-60s. Not long ago it was hovering in the mid-50s. [Cell phones are] one of the most highly prized devices anywhere, and it continues to be a highly personal communication tool. And the dramatic thing to me is people continue to quickly replace them. Not that the replacement rate is going up, but there is very strong demand for the new models. The vast majority use it for both business and personal uses. For the last two quarters personal users only was 50.2 percent, business-only was 1.5 percent and both was 48.3 percent. It's probably pretty consistent [historically].

Question: Vendors are introducing very low cost, low functionality handsets as a way to get market share in developing markets. Are you seeing that here?

Strother: I don't see it yet here, in Western Europe or the advanced markets of Asia, Japan, Korea, Hong Kong or the main cities in China and Australia. Manufacturers don't want to erode their pricing in established markets. They know there is money to be made there. In mature markets [costs] are fairly steady over time. The breakdown is low, medium and higher tier. The high tier is $250 and above. The volume there is fairly low, but the number is reliable and stable at about 10 to 15 percent of the market. The mid tier, depending on how you slice it, is in the $125- to $150-range. That tends to be a fairly sizeable part of the market, maybe 30 to 35 percent. The remainder is the low end, free to $125. I see two worlds: In the mature markets pricing has not changed much, but [in immature markets] the low end phones are $50 and under. I don't see those [prices] in mature markets. I see them going to India, China, Latin America, Africa, anywhere with low GDP [gross domestic product] where operators want to get out cheap phones. Those models will not be entering the U.S. or Western Europe anytime soon. North America is a somewhat unique market in that phones are heavily subsidized.