Charles Dunstone, the ebullient entrepreneur behind the Car-phone Warehouse chain, was in sparkling form at the UK Institute of Directors' annual dinner earlier this month. Dunstone told his audience, which included Finance Minister Gordon Brown, that he loved downturns because "that's when business becomes interesting."
Well, Dunstone has got his wish, and for the boss of Britain's largest mobile phone retailer, business has just become terribly interesting.
Mobile operators had been praying for a bumper Christmas, just like last year's -- to reverse the trend set by sweeping redundancies, savaged marketing budgets and numerous technological setbacks. But unfortunately for the networks, this year Santa is more likely to resemble Scrooge.
Last week, in a move that shocked the industry, respected research firm Gartner Dataquest announced that the industry's days of seemingly inexorable growth were over. Gartner said worldwide shipments of mobile phones had fallen a whopping 10 percent to 94.4 million units in the third quarter of this year, compared with the same period the previous year. Much of the blame for the drop lay with the industry's powerhouse, western Europe, where shipments fell from the second quarter to the third -- contrary to all past trends.
The figures were released just as the mobile phone industry seemed to have turned a corner. Many in the City have been predicting that the industry's worst days are now firmly behind it, making the operators' shares attractive. Tim Rees at fund manager Clerical & Medical says: "There is a much greater appetite for risk, which means that investors are prepared -- again -- to believe in the growth potential of telecommunications."
Rees believes macroeconomic factors have helped stimulate renewed interest in telecom stocks. "Interest rates probably don't have much further to fall; with money this cheap and the market on both sides of the Atlantic up about 15 percent since Sept. 11, the medicine being administered by the central banks looks to be working."
Just as the telephone companies were among the first to feel the pain when the bubble burst in March last year, so they looked to be the early beneficiaries of a tentative return of investor confidence.
Take Vodafone, for example. Its share price fell to 118 points earlier this year; now it is trading above 180 points.
Then came the Gartner figures, sowing new doubts. "Everyone was riding on the euphoria of last year. People were predicting that the industry was going to sell an amazing 500 million handsets this year, compared with 413 million last year," says Ben Wood, Gart-ner's European telecoms research director.
Gartner now predicts total sales this year will be around 400 million and suggests that the industry is capable of "more stable growth" in the future, somewhere between 10 percent and 15 percent. With 77 percent of the UK's adult population now owning a mobile phone, the days of soaring sales growth are at an end.
Christian Maher, telecoms expert at broking group Investec, says a saturated phone market is not necessarily bad. "Margins are improving at many of the mobile companies as the growth in subscribers tails off. Don't forget that the build-up of subscribers was achieved by offering heavily discounted handsets and other benefits. As growth slows, costs come down."
The Gartner figures mark an end to an extraordinary time. The telecoms bubble -- and the mobile phone bubble in particular -- was far bigger and far more sustained than the internet bubble that blew up around it. As the industry enters a more mature, realistic phase, the question is how will the operators continue to drive revenue growth.
Their intention is to drive average revenue per user (Arpu). "Arpu was high in the early days, but as the operators have tried to drive penetration, it has plunged," says Peter Richardson, head of research with investment bank Soundview Technology.
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
STUMPED: KMT and TPP lawmakers approved a resolution to suspend the rate hike, which the government said was unavoidable in view of rising global energy costs The Ministry of Economic Affairs yesterday said it has a mandate to raise electricity prices as planned after the legislature passed a non-binding resolution along partisan lines to freeze rates. Chinese Nationalist Party (KMT) lawmakers proposed the resolution to suspend the price hike, which passed by a 59-50 vote. The Taiwan People’s Party (TPP) voted with the KMT. Legislative Speaker Han Kuo-yu (韓國瑜) of the KMT said the resolution is a mandate for the “immediate suspension of electricity price hikes” and for the Executive Yuan to review its energy policy and propose supplementary measures. A government-organized electricity price evaluation board in March
NOVEL METHODS: The PLA has adopted new approaches and recently conducted three combat readiness drills at night which included aircraft and ships, an official said Taiwan is monitoring China’s People’s Liberation Army (PLA) exercises for changes in their size or pattern as the nation prepares for president-elect William Lai’s (賴清德) inauguration on May 20, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comment at a meeting of the Legislative Yuan’s Foreign Affairs and National Defense Committee, in response to Democratic Progressive Party (DPP) Legislator Wang Ting-yu’s (王定宇) questions. China continues to employ a carrot-and-stick approach, in which it applies pressure with “gray zone” tactics, while attempting to entice Taiwanese with perks, Tsai said. These actions aim to help Beijing look like it has
China is mischaracterizing UN Resolution 2758 for its own interests by conflating it with its “one China” principle, US Deputy Assistant Secretary for China and Taiwan Mark Lambert said on Monday. Speaking at a seminar held by the German Marshall Fund, Lambert called for support for Taiwan’s meaningful participation in the international community at a time when China is increasingly misusing Resolution 2758. The resolution had a clear impact when it changed who occupied the China seat at the UN, Lambert said. “Today, however, the PRC [People’s Republic of China] increasingly mischaracterizes and misuses Resolution 2758 to serve its own interests,” Lambert said. “Beijing