Half Of The Market By 2014
Improves Affordability And Performance Driving Sales
The global market for mobile telephone services is the largest and, arguably, the fastest-growing segment of the telecommunications industry. BMI’s databases recorded a total of 4.628bn mobile subscribers at the end of 2009 – a figure we expect to almost double to 8.134bn by the end of 2014. Within that, Asia is expected to show the steepest projected rate of growth. BMI therefore believes that the Asian region will also be the single largest market for mobile handsets by the end of our forecast period.
BMI’s forecasts underline our belief that significant organic growth opportunities remain unexploited in many of the region’s emerging markets (and in some maturing markets, too), particularly where operators have traditionally been reluctant to step into rural, remote and economically deprived areas. Operators that choose to do so will find it difficult to make profit on the scale to which they have been accustomed in more affluent markets. But their rewards for making these ostensibly risky investments will come from helping low-income users transform their social standing, which will impact on the local economy and thus drive future revenues.
The accompanying chart shows BMI’s forecasts for mobile subscriber growth over the next five years. It clearly demonstrates that Asia and Africa offer the greatest potential for expansion over the period in question, as many new networks begin to roll out across both continents. It is, perhaps, unsurprising that Asia should show the steepest projected rate of growth, despite the fact that the region is largely better served by successful operators. There is a huge number of people who currently do not own a mobile phone because they cannot afford a handset. Actively using basic and value-added services is even further beyond their means. This is why handset manufacturers, such as Nokia, are striving to make their products as affordable as possible. Essentially, more affordable handsets means greater sales volumes (though not necessarily greater revenues from handset sales).
Getting those handsets into the hands of low-income consumers is one thing – encouraging them to spend what little income they have to spare on basic and value-added services is another. And, here, Nokia is also leading the way, by incorporating simple software-based services that give users access to essential life tools, such as weather, financial, location and education services germane to those users’ lifestyles and geographic locations. Nokia is increasingly positioning itself as a service provider, allowing it to offset any losses it makes from selling ultra low-cost handsets by deriving revenues from access to its software-based information services. It partners with local content providers (banks, media, local government, etc) to obtain the content and services are delivered over local networks. This leaves operators in the uncomfortable situation of acting as mere ‘dumb pipes’ but does, at least, give them the opportunity to earn revenue from the traffic carried over their networks and maybe to entice users onto their premium valueadded service platforms.
Low Costs Key To Signing New Mobile Users
Global Mobile Subscriber Growth (’000 Subscribers), 2005-2014 Nokia is having to change tactics in order to survive the onslaught of a host of new competitors. On the one hand, it is attempting to ramp-up the quality of its high-end devices, or smartphones, as these products increasingly appeal even to casual mobile phone users in developed markets. The appeal of mobile applications to improve the mobile internet experience is also a key selling point and Nokia has launched its Ovi-branded mobile store, to some degree of success.
On the other hand, Nokia is all too aware that operators’ efforts to tap the under-served low-income and rural consumer markets in Asia, Africa and Latin America need the support of a low-cost device portfolio. The company is, therefore, actively championing some of the most affordable products on the market.
This reflects the sector’s polarisation into high-end and low-end products and, as such, Nokia should continue to do well in the years ahead, despite heightened competition in the smartphone market and growing dissatisfaction (from the technical community rather than the user community, it has to be said) with Nokia’s reluctance to use an operating system (OS) other than its tried and trusted Symbian platform, a flirtation with the Meego OS for mobile computing notwithstanding. Clearly, the market has changed enormously in the last three years, and Nokia cannot afford to rest on its laurels in either the smartphone or the low-cost handsets field. Its principal challenge comes from the OS front, though, as this and the handset user interface (UI) are often the key elements that persuade a consumer to take a particular handset.
Cost Is King In Asia
Although Nokia is a champion of low-cost handsets for rural consumers, the fact that it needs to import devices from its various manufacturing and assembly plants means that its devices attract various shipping and other marketing taxes, which keep the prices of its handsets from falling too low.
Consequently, the region’s poorest consumers are resorting to indigenously made handsets which cost very little to develop and sport little in the way of battery-consuming gadgetry that is irrelevant to their everyday needs. Whereas Nokia was facing off against multinational rivals such as Motorola, Samsung and LG Electronics for the hearts and minds of Indian and Chinese consumers, it now finds itself outgunned by local white label and home-grown brands able to get sub-US$50 devices onto the market. Among these micro-vendors are India’s Micromax and Wynn Telecom and China’s Tianyu and G-G-Five. BMI expects these companies to take to the international stage before long, buoyed by the relatively low costs of developing unique OSs based on open source systems such as Android and Linux.
Times are changing, but perhaps not as fast as the handset sector.
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