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Mobile phones set for a headache year

The GSM Mobile Phone Congress opens on February 16 in Barcelona in a sober setting. This year will be the first in a decade to see mobile phone sales take a downturn. Do the big players have any magic remedies?

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Up to 60,000 participants are expected to take part in the world GSM Mobile Phone Congress which opens on February 16 in Barcelona for four days. Attendees will be arriving at the Catalan capital with heavy hearts: 2009 is likely to be the first year this decade to see sales start to dive. A study released by the Gartner Institute indicates that sales will fall by between 1% and 4% on a global scale. True to Finnish custom, Olli-Pekka Kallasvuo, CEO of the Finnish mobile giant Nokia, takes a more pessimistic approach in predicting a 5% drop.

Speakers at the most important GSM gathering worldwide are likely to leave aside the habitual crowing, and focus instead on growing seeds of doubt. “Market visibility is insufficient,” stated Nokia, number one in the segment, in a press release posted on its website at the end of 2008. “The times are uncertain,” said Greg Brown, co-chief executive at Motorola, in an interview with the Reuters press agency recently.  

Results, on the other hand, speak for themselves. End of year sales, despite the festive season, fell by 12.6% on a global level compared to 2007. US equipment manufacturer Motorola has decided to axe 7,000 jobs after posting historic losses of over 4 billion dollars in 2008. From its celebrated stronghold in Finland, Nokia is also readying to reduce the ranks.

High-end products are driving the business

Meanwhile, GSMs have fared far better than the property business or the car industry in the crisis. Over 1 billion phones were sold in 2008, matching sales for the previous year.

Dark clouds are not so ominous. High-end products such as smartphones, inspired by the iPhone, and other multi-function mobile phones are driving the business. In 2008, sales of these high-tech gems grew by a considerable 22.5%, compared with a softer 3% sales growth for other mobile phones. “As long as operators can still bring out these high-tech products, then the sector will survive and will appear as bright light in a darkening economy,” said Ryan Reith, an analyst at the International Data Center (IDC).

It would not be surprising to see attendees at the Congress all searching for their personal smartphone solution. Google will be there to talk about its plans for the segment with Android, its new software stack for mobile devices. It is expected that announcements will be made on this front by R.I.M., maker of the Blackberry, Samsung or even HTC. Some brands have recently entered the market, like GPS Garmin or even Asus, despite the economic setting.

“High-end mobile sets have become a symbol of social standing,” explains Christophe Lasnes, marketing director at LG France, in an interview with FRANCE 24. Consumers still find it easier to splash out on the latest GSM, worth around €500, than to fork out €4,000 on the newest high-tech TV screen.   

No end to applications

Smartphones and high-end products signify endless functions for what is fast becoming a mini-computer. Everything from digital cameras to the countless applications downloaded for iPhones, are good to go for avid consumers. “Video games for mobile phones have not seen any crisis,” an official at Gameloft, the leading publisher of video games for mobile phones, told FRANCE 24. Mobile game downloads for smartphones increased by a record 291% in 2008, according to a study published by Comscore.

“Broadband internet and increased levels of access have led people to discover just how many services exist out there,” said Olivier Saint-Reuquier, product manager for Garmin on the French market, in an interview with FRANCE 24. The iPhone Apple Store has been a blessing for suppliers of these services. Over 500 million applications were downloaded (free or at a charge) from the site in the last 6 months. One doubt remains: who out of the numerous developers, operators and manufacturers is likely to reap the gains on the GSM market? As profits become rare morsels in these times of crisis, the cherry on the GSM cake is bound to make many a company hungry for more.
 

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