Handset functions strengthen sales

June 16, 2004

Mobile penetration in most European markets already exceeds 80 percent, so a natural slowdown in handset sales is to be expected. In 2003, however, saturation was offset by a large number of consumers deciding to replace their mobile phones. The Yankee Group report, Western Europe's Mobile Handset Industry Arrives at a Critical Technology Juncture, reveals that following a disappointing 2002, handsets sales in Western Europe recovered--growing 12 percent in 2003 to 129 million units.

Handset subsidies also contributed to the rise in sales. Mobile operators quietly reinstated subsidies (after slashing them in 2002) because they are anxious to push high-end multimedia handsets into the hands of consumers. Higher retail spending was another factor, as a feared recession stalled and renewed economic confidence swept through the region.

"Mobile phones are rapidly becoming more complex," says Farid Yunus, Wireless/Mobile Europe senior analyst. The next generation of users will be exposed to much more than simple SMS and voice. Although technology has improved significantly to handle the many new added features, future mobile handsets will need to incorporate more powerful processors, greater memory components, enhanced displays and increased battery life to cope effectively.

"Handset manufacturers will need to make successive design improvements," Yunus says. "The wealth of possibilities enabled by 3G, Moore's Law, and the growing pool of mobile developers means that the current upturn in sales can be maintained for at least the next 5 years. However, over the long term, there is the fear of upgrade fatigue among consumers, which may lead to slower sales cycles at least until the next big technology leap."