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Worldwide mobile phone sales up 21.5 percent third quarter
Posted: 25-Nov-2006 [Source: Gartner]

[Gartner reports an increase of 21.5 percent in worlwide mobile phone sales Q306 compared to the same quarter last year as the big three - Nokia, Motorola and Samsung - grabbed 68 percent of the market.]

Egham, UK -- Worldwide mobile phone sales totaled 251 million units in the third quarter of 2006, a 21.5 percent increase from the same period last year, according to Gartner Inc. Third quarter sales in Asia/Pacific, especially India and China, rose dramatically and drove overall growth upwards. Asia/Pacific was the fastest growing region this quarter.

As a result of the strong quarter, Gartner raised its mobile phone sales forecast to reach 986 million units in 2006, with 281 million units in the fourth quarter of 2006.

"Although sales of replacement handsets in more mature markets during the third quarter were not as buoyant as we have been accustomed to, they were offset by continuing momentum in sales to first-time buyers in emerging markets," said Carolina Milanesi, principal analyst for mobile terminals research at Gartner, based in Egham. "We have also started to see increasing sales of replacement models in some emerging markets, which helped push up total sales in the third quarter."

Ms Milanesi added, "In a market where players compete on price, technology and strategic partnerships, it is impossible to believe that life is not getting much tougher for the smaller vendors. Nokia, Motorola and Samsung accounted for 68 percent of worldwide mobile sales in the third quarter of 2006."

Nokia retained its worldwide No. 1 position with 35.1 percent market share, gaining 2.6 percentage points compared to the same period last year (see Table 1). Nokia increased its market share in all regions except North America, and also regained the top spot in Latin America after losing it to Motorola a year ago.

While Motorola increased its worldwide market share in the third quarter of 2006, the company experienced challenges in some regions. It lost the No. 1 spot in Latin American and its No. 2 position in Western Europe and in the Eastern Europe, the Middle East and Africa region. The Krzr is struggling to enjoy the same reception that greeted the Razr, and the Motofone may not be available until 2007. Christmas might not be so jolly for Motorola in some markets.

After a shaky first half of the year, Samsung recorded a healthy third quarter with sales accounting for more than 30 million units. Thanks to products such as the D900 and E900, Samsung was able to regain second place in the markets in Western Europe, Eastern Europe, the Middle East and Africa. "Samsung has won consumers back thanks to finding a more personal approach to design and features and by embracing the trend for slim devices," Ms Milanesi said.

"Sony Ericsson had an exceptional quarter selling 19.4 million units in the third quarter of 2006 and gaining one percentage point year-on-year," Ms Milanesi added. "The company's success was a result of building a wider portfolio of successful products rather than counting on a single product. It also focused on better planning to avoid the supply problems that have limited its potential in the past."

The success of LG's KG800 Chocolate started to melt away this quarter, leaving the manufacturer further behind Sony Ericsson in the worldwide ranking. LG needs to expand its portfolio quickly to move up from fifth place.

BenQ declared that it was stopping payments to its German subsidiary, BenQ Mobile, at the end of September 2006, barely a year after its formation from Siemens' handset business. BenQ Mobile in Germany has filed for insolvency. In the three months before, it recorded sales of slightly more than 6 million units.Regional Analysis

In Western Europe, sales in the third quarter of 2006 reached 41.3 million units, a 1.9 percent increase from the same period in 2005. Sales of replacement handsets slowed down as consumers waited for attractive Christmas deals.

In Eastern Europe, the Middle East and Africa, sales of mobile phones grew 19 percent over the same quarter in 2005 to nearly 48 million units. Russia, which remains one of the key contributors to this region, seemed to return to normal after a crackdown on illegal imports which caused a significant increase in average selling prices. Other countries that contributed to the strong performance were Ukraine, Turkey, Egypt, Saudi Arabia, South Africa and Nigeria.

Sales to end users in North America reached 40.8 million units in the third quarter of 2006, up 12 percent from the same period last year. "The growth largely resulted from upgrades and an increase in churn as consumers looked for better deals or upgraded their contracts with their current carriers," said Hugues De La Vergne, principal analyst for mobile terminals research at Gartner, based in Dallas, Texas.

In Latin America, sales reached 29.8 million units in the third quarter of 2006, a 13.7 percent increase from the same period last year. "Although growth slowed significantly compared with last year, we expect full-year growth rates to be in the mid-teens, driven by increasing sales of upgrade and replacement handsets. In general, operators' promotions have become less aggressive as penetration rates leveled off," said Tuong Nguyen, analyst for mobile terminals research at Gartner, based in Arlington, Virginia.

In Asia/Pacific, sales rose dramatically to 80.8 million units, a 54.7 percent increase from the same quarter last year. "Wideband code-division multiple access (WCDMA) phones with at least two-megapixel cameras and multimedia features have become standard when users are looking for a new phone," said Ann Liang, principal analyst for mobile terminals research at Gartner based in Taiwan. In emerging markets, the growth of retailers and the expansion of distribution channels have enhanced sales, particularly in India, Indonesia and the Philippines. Handset vendors have worked alongside carriers' expansion into new areas by proving ultra-low-cost phones or discounted entry-level phones to low-income users.

In Japan, mobile terminals sales totaled 10.7 million units in the third quarter of 2006, a 4.7 percent decline from the same period last year. "Handsets with music players continued to drive sales of replacement phones, and they accounted for 68 percent of mobile phone sales in Japan during the quarter," said Nahoko Mitsuyama, principal analyst for mobile communications research at Gartner based in Tokyo. "In addition, handsets with simple functions and a user-friendly interface became more popular as operators strengthened their portfolios."

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