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3G sales to be weak 'until 2006'

Isabelle Chan
CNETAsia
November 12, 2004, 12:30 GMT

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http://news.zdnet.co.uk/communications/3ggprs/0,39020339,39173549,00.htm

Analysts expect 3G demand to remain strong in Japan and South Korea, but sales will only start to pick up for the rest of the world in 2006

Worldwide sales of 3G handsets remain weak, except in Japan and South Korea where 3G services have been available since 2001, according to data released by ARC Group this week.

A study by the UK-based consulting firm revealed that 3G mobile handsets will form only 4 percent of total worldwide mobile handset sales in 2004. Sales are not expected to pick up before 2006, despite the rollout of 3G networks and services which started to appear in key metropolitan and urban areas in late 2003, stated the report.

David McQueen, a senior consultant with ARC Group and the author of the report, projects that 3G handsets will account for one-third of global mobile handset sales by 2009.

"For 3G adoption to happen on a mass scale in Europe and North America, relevant content, tailored to suit subscriber's needs and region, is essential," McQueen said. "Operators need to change their marketing strategy, away from a technology bias, focusing on the services that 3G can offer and demonstrating the ease of use to consumers."

These emerging 3G markets will do well to learn from Japan and South Korea where the early adoption of 3G services has helped local vendors to spur innovation and sales.

This year's sales of 3G handsets in Japan will grow by 150 percent year on year to reach 17.6 million units. This represents 17 percent of total sales, and by 2009, total 3G handset sales will constitute 90 percent in Japan, stated the report.

The study showed 3G mobiles currently form the bulk of South Korea's handset sales with 117 percent year-on-year growth, thanks to the wide coverage of CDMA 1x EV-DO networks and services. Penetration of 3G handsets is estimated at 55 percent in 2004 and will rise to 91 percent by 2009.

Gradual slowdown
ARC Group's study also predicted that the global mobile handset market will expand by 16 percent with consumers buying 561 million new mobiles this year, up from 482.5 million in 2003.

However, growth rates will gradually slow down over the next five years as the market saturates, with expected growth of 10 percent in 2005 and single-digit growth rates from 2006 to 2009 -- 7.7 percent in 2006, 6.4 percent in 2007, and 4.8 percent in 2008. By 2009, the global market is projected to grow at a mere 2.6 percent with 767 million handsets being shipped, stated the report.

Analysts say growth in Europe and Asia-Pacific -- the more developed markets -- will come from existing mobile phone users as they are encouraged, by handset manufacturers and network operators, to replace their handsets with more feature-rich models, capable of supporting voice and data services.

ARC Group's study also predicted that global handset sales will be buoyed by demand from key developing markets where the market is not yet saturated, namely Brazil, China, India, Mexico and Russia.