The Mobile Computing Market
- RAW METRICS FROM THE PRESS - Handsets -

"Forecasting is a black magic. Greatest real growth in wireless has been in the number of market size and outlook reports published in trade journals. No two forecasts are the same. To satisfy the needs of those who must present this information in their PowerPoint slides and business plans, we are reproducing press snippets that we have seen. At the same time, MobileInfo.Com must sound a note of caution - just use this raw data to make a point - do not put your hard-earned savings in stocks based on these forecasts." - Chander Dhawan, Managing Editor of MobileInfo.Com website

From a worldwide subscription base of 728m at the end of 2000, EMC predicts a 35% in-year growth to 988m cellular subscriptions at end December 2001. Whilst cellular subscriptions are still predicted to grow to reach 1bn in 2002 and 2bn in 2005, the rate of growth has dramatically slowed down from the 52% year-on-year growth witnessed in 2000. Even then, the 2000 growth figure was already declining from the peak rate of 55% of 1999.

Western Europe was responsible for 40% of the annual growth in 1999 predominantly due to the rapid rollout of prepaid GSM services, when operators saw the potential of capturing the mass market as subscribers. Drawing on the experiences of the successful Italian and Portuguese prepaid markets where over 60% of its entire base were on the new style tariffs, other operators hope to emulate them. The strategies proved highly successful, and operators were able to demonstrate increased market share with the growing number of new consumer customers. Operators gained new customers including those who had previously been refused credit for contractual plans or those that were unsure of their potential usage patterns and did not want to pay a monthly fee for the privilege of having a handset for that occasional call. At the end of 2000, 61% of all Western European cellular subscribers were on a prepaid tariff plan.

Yet it is this very group of prepaid users that has led to restatements of operator subscriber bases with new counting policies implemented in 2001. What led to this sudden change of direction led by Europe's top mobile operators? The huge publicity following the European 3G auctions in 2000 forced investors to analyse operators' financial accounts with more scrutiny as they were now being asked for huge funding requirements. The scramble for the limited money market funds available for licence fees and infrastructure rollouts led to greater focus on ARPUs, average revenue per user. By redefining the original investor benchmark – the subscriber base – an operator could present a more stable ARPU figure than it previously could have when including occasional low usage prepaid subscribers.

Monthly ARPU in $	YE 1998	YE 1999	YE 2000	1H 2001
Western Europe	43.05	37.76	32.33	33.01

Source: EMC World Cellular Database

Whilst the issue of subscriber restatements is no longer current nor reported on, its impact coupled with an already declining growth rate, is still being felt in the assessment of how the cellular industry is performing in 2001. How quickly is the market reaching its saturation point?

Cellular subscriber forecasts
The saturation point is another benchmark and normally expressed as a percentage of the population base, thus the assumption that the natural limit is 100%. EMC's forecasts have always included the assumption that a market may grow beyond 100%. Just how far beyond 100% will determine the rate of growth as demonstrated in the five-year forecasts.

Given the current economic climate, EMC has revisited some of these original assumptions in calculating its maximum end penetration levels.

With regard to personal subscriptions, EMC maintains the assumption that all members of the population, bar the 0-4 year age group have the potential for a single subscription. Those falling into the economically active population were assumed to have the potential for a minimum of two subscriptions, one for personal usage, and the other for business usage. This assumption has been restated such that half of the economically active population is assumed to have the potential for a multiple subscription.

EMC has also restated its machine-machine assumption whereby every household was assumed to have the potential for a cellular-enabled device/application. The new assumption assumes that half of all households will potentially have access to such applications.

Combining the assumptions, EMC calculates the maximum saturation point as 140% of the population base. This maximum is only applied to those countries already approaching the 100% mark, predominantly Western European nations. Other markets' saturation levels are assigned as per EMC's forecast methodology, against an index based on weighted factors of GDP per capita, length of exposure to cellular services and the competitive environment.

World Cellular Subscriber Forecasts

Millions of subscribers	2000	2001	2002	2003	2004	2005
Africa	16.6	29.1	48.7	68.1	84.7	100.2
Americas	63.6	92.7	132.5	170.6	202.2	226.4
Asia Pacific	232.1	330.6	442.1	558.8	666.6	761.4
Europe: Eastern	29.5	45.7	61.8	77.0	90.4	101.9
Europe: Western	260.2	336.4	423.3	488.8	532.5	561.1
Middle East	10.4	15.1	20.1	26.3	33.2	40.3
USA/Canada	116.5	139.1	164.5	190.7	215.6	238.2
World	728.8	988.7	1,293.0	1,580.2	1,825.3	2,029.5

Source: EMC World Cellular Database, October 2001 based on actual figures to end June 2001.

Handset forecasts
Based on the projected subscription growth, EMC has revised its handset forecasts that predict the demand for cellular handsets. At the end of 2000, the number of handsets supplied to the industry outnumbered demand, and through industry consensus, it is understood that 40m handsets sold to distributors and wholesalers had yet to reach the end consumer.

The inventory effect has resulted in a reduction in shipments of new handsets as manufacturers attempt to redress the supply and demand equation. The replacement handset market has been impacted by the reduction of handset subsidies in Western Europe and the general economic slowdown reducing the intervals between handset upgrades. With increased focus on contract subscribers, operators are looking to reduce handset subsidies. Lowering subscriber acquisition costs also helps to boost flagging ARPU levels.

Contrary to other published reasons explaining the decline in new handset shipments, EMC does not consider the decline to be attributed to consumers waiting for the launch of new GPRS handsets, albeit the eagerly awaited Nokia GPRS handset. GPRS-enabled handsets are expected to become commercially available in H1 2002 with a range of handsets from competiting manufacturers. Sales of these new handsets will begin to take off as and when operators actually begin to market services and applications aimed at the existing subscriber that will encourage additional usage and bolster ARPU.

World Cellular Handset Demand

1999	2000	2001	2002	2003	2004	2005
265m	403m	457m	498m	589m	653m	697m

Source: EMC World Cellular Database, October 2001 based on actual figures to end June 2001.

Looking beyond GPRS services, EMC has adjusted its forecasts to account for a later W-CDMA launch across Western Europe commencing in Q1 2004. (EMC has held constant its assumption on a 3G launch at Q1 2003 since first inclusion in the model in Q1 2000). The delay is attributable to the availability of handsets. Although leading handset vendor, Nokia, has announced delivery of its W-CDMA handsets by H2 2002, EMC assumes this is more likely to be H2 2003 given that Nokia has yet to deliver on its earlier promise of availability of its GPRS handset.

Despite the more pessimistic view being taken now, the vendors have a vested interest in the success of W-CDMA as many of them are financing the infrastructure rollouts. This vendor commitment to W-CDMA will follow with GSM/W-CDMA handsets being launched into GSM and W-CDMA markets from 2004 and widescale availability in 2005.


EMC – Market intelligence for the world's wireless industry
Website: www.emc-database.com
Email: enquiries@emc-database.com

Summary As of January 2002

Resources: EMC database 

Acknowledgement of Sources: We thank all the sources quoted on this page.