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Mobile market kept afloat by Africa and Asia
Global crunch making cracks?

By Reuters

Published: Tuesday 01 April 2008

A continuing mobile phone boom in emerging markets in Africa and Asia mostly offset a drop in demand for expensive models caused by global market turmoil, a survey showed yesterday.

Handset makers sold 283 million phones in January to March, up 10 per cent from a year ago, but down around 15 per cent from the fourth quarter, which is usually boosted by Christmas holiday sales, according to a Reuters poll.

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JP Morgan analyst, Ehud Gelblum, said: "On a global basis it should be a good, normal quarter."

In the last three years the phone market fell between 9 and 16 per cent in the first quarter from the previous quarter, according to Strategy Analytics.

The world's fourth-largest mobile phone vendor, Sony Ericsson, whose forte is its strongly branded and relatively expensive Walkman music and Cybershot camera phones, warned on first-quarter profits earlier this month.

That followed a warning by chipmaker Texas Instruments of weaker demand for chips for high-end 3G phones, raising fears the global economic slowdown was starting to crimp the handset industry.

Jari Honko, analyst with eQ Bank in Helsinki, said: "The volume in the high end of the market could be somewhat thinner, but this will not be dramatically visible in the overall market volume."

In a Reuters poll, conducted with Inquiry Financial Intelligence, 18 analysts' estimates for first-quarter handset shipments varied from 270 million to 306 million reflecting uncertainties over market growth in China and Western Europe.

Research firm Reuters Insight said it expected first-half sales in China to be flat year-on-year due to soaring food costs, the snow storms that hit the critical Chinese New Year retail period in February, and subdued operator campaigns ahead of an expected sector restructuring by the government.

In Europe, mobile phone market growth slowed to 3 per cent last year, according to the world's top handset maker Nokia, and several analysts said Western European consumers could delay upgrading their phones due to economic worries.

Global market volumes grew 16 per cent in 2007, helped by booming emerging markets sales and also the introduction of Apple's iPhone, which boosted consumers' appetite for more advanced mobile phones in developed markets.

US phone maker Motorola, which has now decided to spin off its handset division, is expected to continue losing market share to aggressive competition from Korean vendors LG Electronics and Samsung Electronics as well as to Nokia.

Neil Mawston, an analyst at Strategy Analytics, said: "We expect Samsung, LG and Nokia to outperform, while Sony Ericsson and Motorola will under perform."

Nokia is continuing to benefit from its dominant position on emerging markets and in making cheap models. Motorola, which in 2006 claimed more than 20 per cent of the market, saw its share halve last year and is expected to lose further ground as long as uncertainties over the future of its handset business continue.