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Wed, Mar 13, 2002 - Page 19 News List

Cellphone makers hope for a rebound

With the market for handsets mature, firms such as Nokia hope consumers will find a reason to buy two phones

BLOOMBERG , HANOVER, GERMANY

A model displays the latest Motorola ultra-light V70 mobile phone at Cebit in Hanover. The phone will be launched for the German market in autumn of this year. About 8,000 exhibitors will present their products at Cebit, the world's largest computer fair.

PHOTO: REUTERS

Bernt Hertz Jensen is a mobile-phone maker's dream come true. The 30-year-old Dane has three different handsets: One from Motorola Inc, one from Siemens AG and one from Ericsson AB.

"Most men love gadgets," the editor of a Danish monthly magazine said. "Some go for a power drill, and others, like me, want the latest in mobile phones or computers."

Unfortunately for Motorola, Siemens and Ericsson, which all lost money on handsets last year, there aren't many more people like Jensen out there. Even in Sweden, where 80 percent of the population owns a mobile phone, only 4 percent have more than one. Industrywide, sales fell for the first time last year as consumers saw little incentive to upgrade their phones.

"We're in a mature market now," said Anders Maazon, chief executive officer of Geab the Phonehouse, Sweden's top handset retailer. "A new approach is needed to keep the market going."

At the Cebit technology fair this week in Hanover, Germany, Nokia Oyj, the market leader, and rivals will try to persuade visitors to buy a new phone or even buy more than one with new models that include color screens, faster Internet connections, and built-in cameras.

Nokia, which makes one in three mobile phones, wants to convince consumers to buy something like the 9210 Communicator, which doubles as a palmtop computer, for business, and the 8910, which has a titanium case, to go out at night.

"There will be phones for many different occasions," said Jan Lindgren, a marketing manager at Ericsson, which last year joined with Sony Corp to make phones to stem losses at its phone unit. "When I go to a party I might want a small device, and at another time, I want another kind of device."

With more consumers expected to replace their old phones this year, having several phones is the next step, manufacturers say. Nokia, which plans to put 20 new phones on store shelves in the first half, expects 55 percent of phone buyers this year to be users who replace their old phone, as opposed to first-time buyers. That's up from 45 percent last year.

The latest phone introductions will boost phone makers profit margins because the average selling price per phone is set to go up, analysts said.

"For manufacturers, the average selling price will increase because the phones will have better gadgetry," said Matthew Lewis, an analyst at Daiwa Institute of Research in London who rates Nokia "outperform" and Ericsson "hold."

Still, manufacturers have their work cut out for them as they emerge from the worst year in the industry's history. Sales fell 3 percent last year, according to Gartner Inc's Dataquest unit. The slowdown helped chop US$100 billion off the combined market value of the top three phone makers -- Nokia, Motorola and Siemens -- and pushed companies to slash thousands of jobs.

Companies like Ericsson and Sony were driven to join forces to compete. At Cebit, the world's largest technology trade show, their five-month-old handset venture will show its first jointly branded products, with features such as color screens, attachable cameras, and built-in organizers.

So far Nokia, which made money last year, is pushing hardest to make consumers buy more than one model, analysts said.

The Finnish company, with more than twice the market share of its nearest competitor, expects to start shipping 20 new models in the first half, compared with 14 in all of last year.

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