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Too many cellphones, not enough landlines?
July 23, 2008
The wireless market would seem to be a promising one, judging by such factors as the long lines of prospective Apple iPhone customers. As the New York Times puts it today, “With millions of people snapping up the iPhone, AT&T, the exclusive carrier for the popular phone, should be quite pleased with the stream of revenue it can expect from customers.”
As I reported earlier, Sanjay K. Jha, COO of Qualcomm and president of Qaulcomm CDMA Technology, said in a June 11 Design Automation Conference keynote address that there are 2 billion wireless subscribers today and that by 2020, 9 billion people will become potential customers, creating a huge market. On the downside, he noted that much of the market will be very cost-sensitive, with few willing to spend $200 on an iPhone. Instead, he said, most prospective customers will be looking to spend 15 to $20.
For carriers, the move to wireless is a mixed blessing. The Times article notes that “AT&T, the biggest telecommunications company in the United States, has a problem: analysts say consumers are dropping traditional landlines faster than expected. The company…still gets 32 percent of its revenue from its landline business...” (After the Times article went to press, AT&T “posted a steep drop in total access lines in the second quarter, but results were buoyed by continued growth in wireless and data services,” according to the Wall Street Journal.)
In addition, market-research firm In-Stat (owned by T&MW’s parent company) reported that, fueled by rapid growth in China, India, and Africa, worldwide cellular subscriptions continued to expand rapidly in 2007, but that due to some areas approaching saturation and a relatively slow world economy, subscription growth in 2008 is expected to be much less. Recent research found that the number of worldwide cellular subscriptions in 2007 grew by 667.6 million over 2006; 2008 subscription growth is forecast to be only 382.5 million over 2007. By 2012, yearly growth in subscribers is expected to decrease to only 163 million per year, roughly twice the population increase projected for that year.
The American market faces challenges, too. The Times article notes that “…as the American cellphone market gets saturated—nearly 85 percent of American consumers already own a mobile phone—phone companies are finding that growth is slowing. With more options, mobile phone buyers are also becoming more selective about the calling plans and the type of phones they want, making the market even more competitive.”
Posted by Rick Nelson on July 23, 2008 | Comments (2)
