Nokia Oyj and rival mobile-phone makers, recovering from the industry's worst year, are counting on handsets allowing speedier Internet access to spark a rebound in 2002.
Sales sputtered this year as economic growth stalled, phone companies cut subsidies on handsets and consumers saw little reason to upgrade phones. That led to losses, thousands of job cuts and falling stock prices at companies including Motorola Inc the No. 2 producer after Nokia, and Ericsson AB.
The top three cellular-phone makers lost a combined US$130 billion in market value this year. Whether sales and stock prices will rebound in 2002 may depend on consumers' appetite for phones allowing them to stay constantly linked to the Internet and transfer data at higher speeds.
"The industry will have very big problems" if mobile Internet services don't catch on, said Jan-Eric Umiastowski, who helps manage 300 million euros at Financiere Rembrandt in Paris, including shares of Nokia and Ericsson.
Nokia, which makes a third of all mobile phones, estimates handset sales will rise as much as 16 percent next year to 440 million. While that would be an improvement over 2001, when sales fell an estimated 6 percent, it would still be far short of the 55 percent average growth in the previous three years.
The Finnish company provided some reassurance to investors this month when it said the popularity of its first phone based on the General Packet Radio Service standard, the 8310, would help it meet or beat its fourth-quarter profit forecast.
GPRS phones eliminate the hassle of reconnecting each time a user wants to use the Web. Nokia Chief Executive Officer Jorma Ollila said enthusiasm for these services will lead consumers to buy new phones, even as economies remain sluggish.
Investors aren't convinced, especially after Nokia lowered its 2001 industry forecast five times, to 380 million units in November from 550 million in October of last year. Its profit declined in the past two quarters.
"Nokia has always been very bullish," said Umiastowski.
"But it will be very difficult for anyone to say where the market is going next year."
GPRS technology will form a test case for so-called third- generation mobile phones, which will let users watch television and hold video conferences on their handsets. Those phones, based on the Universal Mobile Telecommunications System, won't be widely available in Europe until 2003, analysts say.
Optimism that consumers would flock to such products prompted European phone companies to pay some US$100 billion last year for permits allowing them to provide UMTS services. Royal KPN NV, Deutsche Telekom AG and rivals are still struggling to lower the debt they amassed paying for licenses.
Consumer demand for mobile Internet services is so far largely untested. Wireless Application Protocol, a technology introduced in 1999 to allow cell phones to access the Internet, never caught on because users found it slow getting online and had to reconnect every time they wanted to surf the Web.
Should GPRS also flop, analysts question whether third- generation services, or phones, will be well received.
"If you can't make a business case out of GPRS, then there is no third-generation market," said Bengt Nordstroem, founder and CEO of Northstream, a Swedish telecommunications consultant.
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