American consumers may well be treated to “a moveable feast” this fall.
Unlike the sketches of 1920s Paris by Ernest Hemingway by the same name, however, this one is more akin to a mobile smorgasbord for buyers: more choice, cutting-edge models, attractive prices and the promise of pleasure and productivity.
Conversely, for sellers – handset vendors and their carrier partners – the upcoming months will mark an “autumn melee,” according to analyst Tero Kuittinen at Global Crown Capital L.L.C.
“The June/September period in the North American handset market is possibly the most intensely competitive stretch the United States phone sector has ever witnessed,” Kuittinen said. “Rival brands have launched large-display phones with some of the most aggressive pricing ever witnessed on handsets featuring advanced technology.”
The U.S. market – “notoriously uncompetitive” until this year because most leading handsets typically debuted elsewhere – is now the stage for global debuts and near-debuts, Kuittinen said.
Motorola Inc., once the beneficiary of this formerly stodgy market, may take a beating just as it rises from the mat, the analyst said.
Anatomy of a melee
U.S. consumers keen to upgrade this fall will be driven by pricing, brand, form factors and feature sets, though not necessarily in that order, according to Matt Thornton, analyst at Avian Securities L.L.C.
Consumers increasingly assume that leading handsets will offer multimedia, browsing, messaging options, navigation and increasing camera resolutions, now reaching 5 to 8 megapixels, Thornton said.
One of the key technology shifts, according to Kuittinen: the size and resolution of displays. QVGA displays defined by 240 x 320 pixels are giving way to full VGA displays as sharp as 480 x 320 pixels, the analyst said. And size matters – big displays are in.
Most of the major vendors and some scrappy contenders are expected to launch devices with some combination of large displays, touchscreens, QWERTY keyboards and “smartness” this fall. Purported details on dozens of new handsets have circulated on various handset-related Web sites, but separating fact from rumor is daunting. Carriers and vendors typically have kept news of pending device launches closer to their vest – unlike past years – as the competition has intensified.
But discussion has focused on an expected slew of touchscreen devices from vendors anxious to reclaim mind share grabbed by Apple Inc.’s iPhone.
One wild card that has been hyped and much-discussed is HTC Corp.’s “Dream,” expected at T-Mobile USA Inc. by year’s end. It would be the first handset to offer the Linux-based Android operating system championed by Google. And the run-up to its eventual release could work against it, according to one analyst.
“Google has to compete in the real world,” said Avi Greengart, analyst at Current Analysis. “If the handset is tremendously exciting, good. If not, so what? If there’s no compelling value proposition to the consumer, then it falls flat.”
Subsidies for the stars
Moving techno-monster handsets into consumers’ hands means that subsidies by top-tier carriers will focus more on the most cutting-edge models, though it isn’t clear if carrier subsidy budgets overall are increasing, according to Greengart.
“A year ago, the iPhone taught us that consumers were willing to pay a premium for an advanced device,” Greengart said. “Now the Samsung Instinct at Sprint and the iPhone at AT&T are getting an outsized subsidy. It’s very clear that key devices, tied to revenue-generating data services, are getting the most attention. There’s a clear return on investment there. And the carriers must contain churn and draw subscribers from other carriers.”
Fortunately for handset vendors, carrier subsidies often buffer them from macro-economic trends, Thornton said. Other currents are in play, as well. Tough times may lead more consumers to give up their landline for their mobile, favoring the wireless industry as a whole.
Another possible current: If consumer spending does slow, it could favor well-positioned vendors with attractive, low-end offerings, where the standout beneficiary might be … Nokia Corp., according to Kuittinen.
The vendors, high and low
The forecasted handset “melee” was already beginning to shape up at the mid-year mark.
The star was Research In Motion Ltd., which had gone from 4% overall share of the U.S. market in the first quarter to 11% in the second – selling one in 10 handsets in this country by virtue of its move into the consumer space with the Pearl and Curve models and a near-ubiquitous presence at the top carriers, according to data from Strategy Analytics.
Motorola was hanging on to its sequential market share between the first and second quarters. Samsung Electronic Co. Ltd. had slipped – the hot-selling Instinct launched in June, at the end of the half-year mark. And LG Electronics Co. Ltd. showed strong gains, particularly at AT&T Mobility and Verizon Wireless.
Of keen interest to those – like most of us – who enjoy the high-tier handset battles, Nokia’s progress earlier this year was an eye-opener. The Finnish vendor, which has struggled in the U.S., moved the needle from about 5% share in first quarter to nearly 10% in the second.
That fact suggested to Kuittinen that if macro-economic conditions pressure handset sales in the back half of the year, vendors with appealing low- and mid-tier plays may make gains.
