Opportunities for growth

21 Mar 2006

Service providers see technology enhancements enabling new services and generating new revenue

As mobile phones for watching TV, listening to music, playing games and snapping photos begin to take root worldwide, service providers and manufacturers are already making plans for the next generation of devices. On the horizon (or in some cases, in early deployment in offshore markets) are cellphones that can control game play with a tilt, replace access control badges, and interface seamlessly with wired systems, automatically downloading music or photos from a cellphone to a home PC through an auto discovery mechanism.

Now that mobile penetration in many parts of the world has reached a plateau, new growth depends, to a large extent, on generating revenue from new services. And advances in the devices that customers use to access cellular networks often can help enable those new services. Recognizing that, the fact that wireless device sales outpaced market forecasts for 2005 is a good sign.

'Last year we saw 15% to 20% growth in the cellphone market; people were predicting 5% to 10%,' notes Doug Grant, director of wireless systems business development for Analog Devices, a cellphone component supplier.

This increase has been fueled in part by a strong replacement market. 'In the developed world, replacement phones are 60% to 70% of the volume of wireless devices sold,' says Grant. 'As new features come out and 3G networks become more mainstream, people will start buying new handsets and the replacement market could exceed the 70% number.'

Research firm Frost & Sullivan confirms that trend, but finds some differences from one world region to another. In Western Europe and Asia, users currently purchase a replacement phone every 1.4 years, on average, notes Frost & Sullivan industry analyst Daniel Longfield. But the firm's most recent research found that Western European and Asian users now expect to purchase a new phone in 1.2 years, on average. In the US the trend is steeper. Users had purchased a new phone once every two years, on average, but now expect to purchase a new phone in an average of just 0.7 years.


Service providers can best leverage the demand for devices through careful market segmentation, says Joel Thompson, director of product management for wireless devices for Sprint. Pointing to the success of Sprint's Boost brand prepaid offering and that of RIM Blackberry messaging devices, he says the most successful offerings target a specific market segment with a device that is highly focused on the needs of that segment. 'Sprint blew business users into multiple pieces and worked to get the features each segment needed,' says Thompson.

'Ultra-successful devices are those with a singular purpose,' Thompson adds. 'RIM Blackberry is the number one selling data device because it does email well and can also make phone calls.'

With the right device in hand, customers tend to use wireless networks more heavily, according to Scott Lingren, director of product marketing for cellphone manufacturer Nokia. 'Service providers are seeing a significant increase in voice and data traffic in ways they haven't seen in the past,' he says. 'If I can send someone a Powerpoint and they fill in the blanks and send it back, that's significant network usage.

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