Blog Post

Handset Market Decline May Soon Affect Carriers

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

cimg1027As people in the U.S continue to line up for mobile phone launches, the rest of the handset market is looking pretty grim. Optimistic news about the BlackBerry Storm is akin to Restylane in an aging actress — a plastic filler that hides signs of decay underneath. Today Samsung said that the handset market won’t achieve the 9 percent growth it anticipated for 2008 back in June, and pointed to a lackluster 2009. James Chung, a spokesman for Samsung, told Reuters the electronics giant was looking at single-digit or (the mathematically impossible) “negative growth” for next year.

This follows Nokia’s grim update earlier this month in which the world’s No. 1 handset maker predicted a sales slowdown. As we’ve already noted, lowered handset sales hurt chipmakers and handset makers, and may eventually hurt carriers, which use new handsets to encourage consumers to buy new, or more inclusive, data plans.

Wireless data plans are still enjoying a steady takeup rate as people purchase sub-$200 smartphones. But even though people may still buy those smartphones as Christmas gifts, my bet is that data subscriptions will also hit bumps if the economy continues to pummel consumers. I fired off a quick email to Chetan Sharma to find out how he thought the lowered handset forecast might affect carriers and their efforts to push data plans; he said we won’t know for sure until next year.

“Now, we don’t know if these trends will counter each other to balance things out or will the replacement cycles slow down quicker to bring down the services market. Q3 data didn’t have any indication of that and I doubt if Q4 data will have any conclusive evidence of the trend. I think the first indication of things are shaping up will be in Q109 results as by then consumers and the markets will have a better understanding of the new economic policies.”

March is a long time to wait, but I’m curious how the economic slowdown will affect your data subscriptions. Will you pare back?

10 Responses to “Handset Market Decline May Soon Affect Carriers”

  1. in many european countries it has become common for carriers to offer heavily discounted plans for customers that ‘bring there own phone’ instead of getting a subsidized one. this certainly would lead to both lower handset sales eventually lower revenues for the operators.

    i would agree that ‘tethering'(or a bundle that includes a laptop data device) is the killer app that could bring major revenue growth to the carriers; but it has to be priced right.

  2. Good thing this doesn’t affect Motorola Krave owners! I am a huge fan of the Krave’s 2 megapixel camera and touch screen display. ( Has anyone else seen it or own one? I’ve been a fan of this thing ever since I started working with Motorola. It’s awesome!

  3. @Stacey,

    I agree with you and SFMitch’s comments. In fact, I believe a significant growth opportunity for the carriers are bundled plans where customers can get cellular service AND service for laptops with broadband access. If priced right, I think the carriers would see substantial growth.

    For the record, I won’t be reducing my cell phone data usage at all.



  4. Stacey Higginbotham

    I have data on my phone and a USB modem. I will admit that i would kill the modem plan if GigaOM didn’t fund it. maybe I would then consolidate though with a more web savvy handset instead of my Pearl. Pay for data on my phone, but not for my laptop.

  5. The economic slowdown will have no affect on my data subscriptions (1st gen iPhone w/ AT&T). Cell phone with data is right near the top of my ‘I’m not giving this up’ list.

    Having slow growth, or even no growth, will hurt the weakest players the hardest. As the quality of new phones continues to improve, those who can’t compete (Motorola, Palm, etc.) will feel the most pain.

    I expect Apple, RIM & Google/HTC to continue to do well, regardless of economic outlook. Seriously, people aren’t going to stop buying cell phones.

  6. I will not cut back (OK, I have free data since I have been a Sprint customer for 8 years) but I would pay for it if I had to – gotta have email (and ESPN)! I am sure there is a % out there that have data as a “nice to have” that may go away and thus not be replaced with new customers who do not see data as a necessity. So, neutral to negative growth for data in ’09 is a possibility.