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Wednesday, April 27, 2005

Future of mobile phones

This is actually a must-read article about potential future trends in the mobile phone industry - actually one of many that I currently feature. But it gives a great overview and links to the other articles in quite a nice manner.

The article at hand is based on findings made available by Ron Garriques, executive vice president of Motorola's personal communications sector. He says the following:

"The high-growth markets are India, Pakistan, the Middle East, Africa, Turkey and all of South Asia," he said. "These markets are dominated by Nokia, with over 60% market share. Nobody else has more than 10%." He indicates that the total global market size of the mobile industry is about US$100 billion that produces approximately 700 million mobile phones annually. A big challenge comes from Chinese mobile phone producers and the inherent trend in the industry to commoditize the products. "Motorola's competition with Nokia has heated up with Motorola's recent release of a US$40 phone. At that price, the phone is cheap enough to be sold competitively in poorer countries." "Affordability is especially important in China, which is flooded with phones. "There are about 200 manufacturers of cell phones in China that are state-owned enterprises," Garriques noted. "They believed that the market was a commodity business and created about 18 million cell phones that nobody ever bought. They are all being offered now for US$5 a piece. [These companies] called the market wrong. The technology curve changed -- from grayscale to full color, from candy-bar to clamshell -- and all those phones are just sitting there." And this is a huge number I believe.

The challenge for mobile phone operators is to increase the Average Revenue Per User or ARPU. It is clear that voice services becomes a commodity and that the industry intends to keep or increase ARPU with more value added services.

Garriques correctly doubts that phone-shared pictures and video will bring the kinds of gains companies want.

He put it this way: "I don't know about you, but the two worst fears I have when I go to someone's house are that they are going to show me their picture albums and home movies. Why would you think that, just because it's on a cell phone, people want to do it?"

Instead, he predicts that the email capability offered by, for example, a Blackberry will spread to more devices. "That's a real ARPU generator. Once you get a 'Crackberry' [so-nicknamed because of its addictive appeal], you use it over and over and over again."

I actually have to agree. Since I upgraded from a "normal mobile phone" to a PDA phone, I send more text messages or SMS, and I am more willing to access the Internet with it - thus, the recipe is easy, as usual: engage customer and make their life easier so that they can cope with more issues better.

(By Asia Business Consulting)