ENN Year in Review 2006: An eventful year for the mobile market

22-12-2006

by Ciara O'Brien

It was a mixed year for the mobile industry with handset sales booming, but operators' revenue falling as competition intensified in the market.

Meteor and Three Ireland ramped up their fight for subscribers as both made a bid to shake Vodafone and O2 from their dominant positions in the Irish market. Elsewhere, 3G came to the fore as the existing mobile operators came up with new offerings for their customers, designed to entice them into adopting the technology.

Once again, it seems little has changed in terms of the dominant players: Vodafone continued to rack up the results in 2006, with more customers turning to the network. It managed to entice 29,000 new customers to join in the third quarter of the year.

Vodafone Ireland now boasts a total subscriber base of more than 2,119,000, putting it firmly in the top spot.

This is impressive in a year that has seen increased competition, which may have been a good thing for consumers, but it had a knock on effect for the operators, with Average Revenue per User (ARPU) falling 4.9 percent compared with a year earlier. This didn't faze Vodafone, which recorded a 9.8 percent increase in voice minutes used in the 12 months ending September 2006.

However, it could be a sober New Year for Vodafone employees as rumours of possible job losses in the New Year did the rounds in the dying weeks of 2006. The rumour mill claimed up to 500 jobs could be at risk. Vodafone has denied that any cutbacks are definitely on the cards -- but they haven't ruled it out either, claiming that a review is taking place.

At the end of 2005, it looked as if 2006 would be a positive year for O2 too, with the Telefonica deal on the table and due to be completed during 2006. Since the deal was completed though, the operator has seen its ARPU fall -- welcome news for hard-pressed Irish mobile phone users, not such good news for O2.

For its part Three Ireland took a leap forward in 2006 with the launch of its X-Series product, a mobile broadband offering. The X-Series of mobile phones will allow users to access web services such as e-mail, internet messaging and internet phone calls for a flat monthly fee. The company is promising broadband speeds of up to three times the speed of that available in homes. Pricing and availability will be announced in early 2007. Three Ireland also launched its pre-paid Three Pay product in May and rolled out a HSDPA (high speed downlink packet access) offering in Ireland in the dying weeks of the year.

Three isn't the only operator to roll out HSDPA services; Vodafone quietly launched its offering in mid-November.

Meanwhile, Meteor is emerging as a strong contender in the Irish mobile market. After ending last year with a high dependence on pre-paid customers, Meteor has tried to make inroads into Vodafone and O2's customer share in the contract sector.

Already the operator has managed to boost its market share significantly; in the first six months of 2006, Meteor added 109,000 customers, with 51,000 in one quarter alone. Those figures brought Meteor's market share to 16 percent, up from 10 percent when Eircom took over the fledgling network in mid-2005.

The spotlight was also thrown on the 3G market in 2006. Hopes of a new 3G operator entering the market were postponed when ComReg revoked its offer of the fourth and final 3G licence to Smart Telecom. The telecoms firm tried to get the decision reversed, even taking it as far as the High Court in a bid to force ComReg to reissue the offer. However, ComReg was not swayed, and the court decision ultimately went against Smart.

All reports indicate that Eircom is now eyeing the 3G licence, but it may have competition, with Swiftcall also expressing an interest.

Consumers will be left in limbo until the licence is awarded, although if Three's entry to the Irish market is anything to go by, 3G fans can expect the increased competition to lower prices.

Get telly on your mobile

TV also made its way on to Irish mobile handsets in 2006 as Sky launched a mobile TV service in a deal with Vodafone. Under the agreement, Vodafone's 3G customers gained access to select programmes and packages, including sport, films and entertainment, with the operator tempting customers with free access until September 2007.

The UK wasn't to be left out. Virgin Mobile enlisted the help of Pamela Anderson to promote its broadcast mobile TV service earlier in the year, with channels such as the BBC delivered over the service.

Analysts believe it is developments of this nature that will continue to drive the mobile handset market, as consumers look for more fully featured devices to get the most out of the new services.

Despite expectations that the mobile phone market would slow this year, global handset sales exceeded 1 billion units for the first time in 2006.

Overseas, the Asia Pacific market showed significant progress. "2006 was the year of APAC," said Neil Mawston, Strategy Analytics, adding that sales rocketed during the year.

In Europe, the mobile phone market has passed the 100 percent penetration rate and continues to advance as consumers invest in more devices. It seems that converged devices -- phones and handhelds that can be synchronised with servers, desktop PCs, or laptop computers and can handle personal information or e-mail -- are playing a large part in this trend, driving mobile markets in Western Europe.

However, Ireland's love affair with the mobile phone is already outstripping the general European trends. The country surpassed 100 percent penetration in late 2005, reaching 106 percent by December, according to ComReg latest quarterly figures.

Big hitters continue to thrive

On a global scale, Mawtson said it was a good year for the large mobile makers, with major players such as Nokia and Motorola building on their substantial customer base.

A Strategy Analytics report in October claimed that Nokia's market share is at its highest point in three years, earning itself 35 percent of the global market. The company has a lot of loyal fans out there, despite several concerted attacks by rivals such as Motorola, Sony Ericsson and Samsung. This is due in part to success in emerging markets.

Mawston explained that throughout 2006, ultra thin handsets emerged as the clear favourite in the mobile market. This is one trend that Motorola is obviously hoping to capitalise on with its new Krazr phone, itself a follow on from the phenomenally successful Razr phone.

However, the October report by Strategy Analytics claims that the super thin phone's popularity may have hit a peak. For the first time since the first quarter of 2005, Motorola was knocked off its perch as the fastest growing mobile manufacturer. But this does not mean a waning of Motorola's popularity with phone fans; the US-based company still increased its shipments by a 39 percent annual rate in the third quarter, and claims a 21 percent market share.

Music is where it's at

Last year was the year of the camera phone, but music phones are also growing in popularity. Mawtson told ENN that music phones have now become the new "must-have" device, in much the same way as the camera phone was last year. Music phones will continue to dominate the mobile landscape, with Apple expected to be the hot talking point in early 2007. "The Apple iPhone will steal all the headlines for the first few months of the year," said Mawtson.

What's in store for 2007?

In 2007, Mawtson expects global handset sales to top 1 billion for the second year running. Much of this could be fuelled by growth in the emerging markets -- like the trends seen in 2006, emerging markets are expected to lead the way in the coming year. With developed markets at -- or close to -- saturation point, the focus could shift more prominently to these new markets.

It could also be a tough year for mobile network operators, as EU ministers lent their support to crack down on roaming charges, which could put a dent in revenues. Britain and France were two nations who felt that the operators should be given a chance to cut charges themselves, but it seems EU Commissioner for Information Society Viviane Reding is determined to cut roaming costs by up to 70 percent by summer 2007.

Mawtson is also predicting more mergers and exits from the market. "Likely candidates for action include Sagem, Sanyo, NEC and Panasonic," he said.

With regards to new developments, next year could also see the emergence of the dual mode GSM/Wi-Fi phones. In July, Skype's UK manager revealed that the internet phone company was working with Motorola, Nokia and other major hardware firms, along with software giants such as Symbian, to come up with the new phones.

The devices would allow users to logon to Wi-Fi hotspots when available to make phone calls, and at other times, connect to the available GSM networks.

It seems that 2007 holds the promise of exciting developments in the mobile market as the operators gear up for the next generation of services. Which of these will capture the imagination of the public has yet to be seen.