A call to arms

By Christina Okoli

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NEARLY everyone has a mobile phone these days, good news for network operators, bad news for manufacturers. In fact, with two-thirds of people in the UK and Europe already owning a handset it seems that the top mobile-phone making companies no longer have anyone to sell to.

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When phone manufacturers Ericsson, Motorola and Nokia recently announced a fall in profits, it confirmed a trend that analysts have been predicting for years, whereby the sale of mobile phones would fall sharply once the market reached saturation point. And, as sales of mobiles have hit record lows, it appears that everyone in the UK and Europe who wants a mobile phone has now got one.

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The technical term for this is market saturation, and it leaves mobile phone companies in a 'Catch 22' situations; whereby they are victims of their own success. Market research carried out by the companies shows that, on average, consumers purchase a new mobile handset every 18 months, and as the situation stands, supply of mobile phones is far greater than current demand.

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Leading phone companies, which have been struggling to meet sales target for several months, hoped that the introduction of more technologically advanced phones such as WAP and�third generation phones, would encourage people to buy new handsets more regularly. However such technology has proved a great disappointment. WAP phones, which were widely marketed by Nokia last year, fell short of consumer expectations; with poor graphics, slow Internet access and unreliable handsets, the WAP phone has been haled a phenomenal flop.

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In addition, Nokia's other trump card, the general pocket radio service (GPRS) phone, which was scheduled to be launched early this year, has been hit by technological delays and will not enter circulation until 2002.

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After a string of such disappointments and setbacks shares in Nokia, which is the world's largest mobile phone manufacturer, plunged by 5.5% this January. The company lowered its industry-wide mobile phone sales forecast for 2001 from 550 million units to 500 million. The move came in the wake of recent reductions in global sales forecasts by US rival Motorola, and a warning on growth from Sweden's Ericsson.

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Also, in January Ericsson, the world's third largest supplier of mobile phones, announced it would pull out of handset manufacturing to stem huge losses in its consumer products division. The company is to shed 10,000 jobs as part of the initiative to save money. Though Ericsson is the only leading phone maker to abandon production, industry analysts see the move as a glaring indication that the mobile phone industry is condensing and sales are rapidly slowing down.

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Phone companies have also been hit by poor sales in the US, where, unlike in the UK and Europe, the mobile craze never really took off.