Tuesday November 7, 4:05 pm Eastern Time
Mobile phone replacement rate rising - study
By Yukari Iwatani
CHICAGO, Nov 7 (Reuters) - Mobile phone service subscriber growth may be declining, but the phone replacement rate, or the
percentage of phones that are bought by established subscribers, is increasing and driving the mobile phone market, a recent study
said.
According to Herschel Shosteck Associates, a wireless consulting firm based in Washington, the phone replacement rate will reach 50 percent in 2003, and sales of
replacement phones will surpass sales of first phones to new subscribers.
The firm said improvements made to mobile phones such as size, weight, style and Internet capability are helping increase the replacement rate among existing mobile
subscribers.
The replacement market is seen as key for mobile phone makers in the coming years as markets mature and more people choose to upgrade their phones.
The study results also confirmed Nokia's (NYSE:NOK - news) view that the replacement market is healthy. In a more optimistic estimate, Nokia Mobile Phones
President Matti Alahunta had told Reuters last month that phone replacement rates could be as high as 70 to 80 percent in coming years.
Herschel Shosteck said the rise in replacement sales is driving the introduction of new technologies, particularly Internet-enabling technologies. The study predicted
that 90 percent of mobile phones sold by 2003 would be Internet-enabled compared with only 10 percent this year.
While Internet-enabling technologies open new doors for traditional mobile phone makers, the study warned that the same technology will lead to greater
competition, as nontraditional phone makers like consumer electronics firms develop other wireless Internet appliances.
``The marketplace for these future devices will be highly competitive over the next three to five years,'' the study said. ``While manufacturers in the past have been
able to build reputations based on smaller and lighter voice phones, the introduction of the Internet-based content services is a wild card.''
Herschel Schosteck Associates said the Big Three mobile phone makers -- Nokia, Motorola Inc. (NYSE:MOT - news) and Ericsson (NasdaqNM:ERICY - news)
-- were all making good efforts to reposition themselves in this changing industry, but they must understand the importance of consumer devices in order to succeed.
Historically, the wireless industry first targets high-value corporate markets before targeting consumers. The study implied that if mobile phone firms fail to adjust this
way of thinking, they would lose out to consumer electronics firms, such as Japan's Sony Corp. and Matsushita Electric Industrial Co.
``Major consumer electronics firms are best positioned to build the next generation of wireless Internet devices,'' Rich Luhr, director of technology strategy for
Herschel Shosteck, said in a news release.
``The ability of Sony, for example, to build key technologies into a family of devices will prove important. Sony, with its huge retail distribution, brand name, market
share and partnerships, may succeed in a a strategy of designing multiple, compatible devices where others may not,'' Luhr added.
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