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4 Mar 2009

Industry

Mobile Phone Industry, 2009: 3G – Major Contributor to Future Growth (Business Brief No.2448)

The mobile phone industry will be among the more promising industries this year despite amid the global economic crisis. Even though it may record slower growth, it remains relatively healthy. Broadly speaking, the mobile phone industry can be divided into two segments:
- Service providers They are expected to feel the impact of economic slowdown, especially dwindling consumption. As the mobile telecom phoneservices has become increasingly are necessary for many these days, the market ismobile services are not expected to experiencesee a significant slowdown. In voice-based services, there seems to be little room for growth, especially in new subscribers. Presently, there are around 61 million cellular numbers, representing a mobile number penetration rate of 96.2 percent. Even though one mobile usere subscriber may own more than one number, the market is nearing the saturation point. Price wars continue in the market where promotions focus mainly on cheaper calling rates within the same network. We are, however, unlikely to see more an aggressive marketing campaigns amid consumers' need for cautious spending behavior that may lead to a decline in call volume. Emphasis may be placed on a wider variety of promotions to match the diverse needs of customers. Meanwhile, potential seems to lie ahead for non-voice services or value-added services (VAS), including SMS and MMS – the most popular VAS – as well as news updates, ringback tones/ringtones, and Internet access. Nonetheless, the government's notion of collecting a tax on SMS service may inevitably affect both operators' marketing plans and VAS volume, even though details about the tax rate, method of collection and type of services to be included in the tax base are still sketchy. Presently,So far, the VAS market is being has been influenced by technological and user restrictions. reWithout
 due to no 3G technology, data transmissions are still slow – – the main hindrance to data transmission speed and new content development. In addition, the number of VAS users remains quiteis still moderate, most of whomf whom are students and career people in larger urban areas. This will be a major challenge for mobile telecom service providers when it comes to market expansion.
KASIKORN RESEARCH CENTER (KResearch) projects that market turnover for cellular services may total around THB166-169 billion, a YoY increase of 0-2 percent, down from some THB166 billion recorded in the previous year YoY – an increase of 4 percent. Despite this lower growth, the business has been able to withstand the contraction.

- Handsets Overall, the mobile phone equipment market has been hit harder by the economic crisis than the service market. As mobile handsets are regarded as non-essential items, replacement purchases may slow amid the economic difficulties. On the plus side, however, the handset market may be supported by price reductions to spur ebbing consumer demand. This may lead to purchases of new handsets by existing mobile users. Similar to the mobile service market, pricing promotions may highlight the business for a while. Notably, price wars will remain prevalent in the low-end segment, especially for low-priced house brand products with high functionality. As a result, the market share of house brands and major brands may rise to 30:70. Meanwhile, less intense price competition may be seen in the high-end segment where the prices of handsets are declining. The focus will be on design and functionality, i.e., touch screens and 3-G enabled function this year.
We project that there will be around 8.8-9 million new mobile handsets this year, which is close to or down slightly from some 9 million in 2008. However, the handset market turnover is expected to drop to around THB30-31.5 billion in value, a YoY contraction of 10-15 percent, compared to THB35 billion in 2008, shrinking 5 percent YoY.

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