The US mobile phone market has flipped into an immediate recession ‘ with sales of handsets declining 13% – no wonder the major US handset manufacturer Motorola is in such a sorry state right now. The likely implications for Europe could be the same over time as consumer spending falls in the wake of price increases in every sector due to the rising price of oil.
However it is hitting harder and earlier in the US and since mobile operators buy most handsets in the US (and in Europe) due to handset subsidies, handset sales usually suffer when operators are going through a period of uncertainty.
So this news from market researcher NPD is counter intuitive, coming as it does on the back of hugely upbeat quarters for the two major US cellular operators Verizon Wireless and AT&T, where they averaged increases of more than 1 million new customers in the quarter and had exceptionally low churn rates. The fact that the third placed network, Sprint is in such a bad financial state may also be a contributing factor because it is losing customers.
In the US most handsets, some 63%, are sold from stores owned by the respective carriers, and AT&T sold 29% of devices and Verizon 26% with and 11% each for T-Mobile and Sprint. The research company also said that sales were flat for Samsung and Nokia, and actually went up for Sony Ericsson and RIM.
This is partly due to a huge trend in the US towards devices which have full keyboards, like the RIM Blackberry, which for the second quarter represented 28% of devices sold versus 12% a year ago.
The US is not a saturated mobile economy, and around 80% of people have a handset there rather than in large parts of Europe where the ratio is more than 100% (some people have two or more devices), which makes the slow down even more surprising, since a saturated mobile economy should really slow down first. In total 28 million devices shipped in the quarter and given that more people are signing up for mobile each year, this must mean that less people are opting for new handsets and new operator deals.
Motorola just barely managed to maintain its lead as the US’ favourite device maker, falling from 27% of the market in the first quarter to 21% a fraction ahead of Samsung and LG (both on 20%). Alarmingly, in the US, Nokia is barely ahead of the Blackberry on 9% and 7% of market share respectively, so a US market slowdown ironically will hit Nokia less than anyone else.
Smartphone sales made up 19% of sales in Q2 up from 10% a year earlier, although the NPD definition of a smart phone may not be everyone else’s, and 65% of phones bought in the quarter were music enabled.