Mobile market begins to stutter

The mobile market is reaching saturation point

By CNN's Joe Clancy

LONDON, England (CNN) -- It is a tale of two telcos. Swedish mobile phone giant Ericsson has suffered its "sharpest dive in history," while its Finnish arch rival Nokia soars.

Ericsson announced a loss of $488 million -- and says it is to axe an additional 12,000 jobs from its global workforce.

Meanwhile Nokia posted a near 10 percent increase in pre-tax profit to $1.3 billion in the first quarter. It sees 20 percent sales growth for the rest of the year.

But behind the figures lies a sharp warning that the mobile phone market is showing its first signs of stuttering after years of booming growth.

Both the Scandinavian telephone companies are now singing the same tune when it comes to talking about the future.

VIDEO Nokia's chairman, Jorma Ollila: Company will continue to grow QuickTime Play video Real Play video Windows Media Play video Ericsson's CEO, Kurt Helstrom: Future looks grim QuickTime Play video Real Play video Windows Media Play video

Nokia's 20 percent sales growth rate, while seemingly impressive, is down from its earlier estimate of 25 to 30 percent.

And Ericsson's Chief Executive Kurt Hellstrom called his company's slump "the sharpest dive in history." He said: "As far as I can tell it was not predicted by anyone."

Mobile phone sales around the world were expected to hit 650 million this year, but that figure has now been revised sharply downwards to 450 million.

Both companies were planning their business on the basis that mobile users were going to upgrade their phones frequently.

But delays in the rollout of new third generation devices have slowed down the uptake. Consumers are unwilling to trade up until new multimedia services -- like games, music and video -- become available.

Another key factor is the mobile market reaching saturation levels in many countries with European consumers leading the way as early adopters.

Sweden tops the global leader board with 76 percent of the population owning a mobile phone.

The figure in Finland is 70 percent, and Switzerland comes third with 67 percent. In Norway and Denmark, 63 percent of the population owns a mobile phone.

Europe's leading economic powerhouses lag behind in mobile penetration, with older consumers -- those over 50 -- holding out in Germany, France and Italy. The UK, home of network operator Vodafone, has 58 percent penetration.

Italy, with 57 percent, and Spain, with 53 percent, both outgun Germany and France.

Nokia is the clear market leader with 32 percent of the world handset market, making it the world's biggest mobile phone company.

Ericsson is the world number three with 10 percent of the mobile market, but 80 percent of its business is in building infrastructure for the networks.

Analysts say Nokia reached its premier position because it was the first to understand that mobile phones would become a fashion item and produced smaller, sexier phones.

Ericsson meanwhile has concentrated its business on building the infrastructure for mobile phones, but that has been hit by the huge cost of setting up the next generation of mobile phone technology.

Analyst Chris Doyle, director of telecoms at Charles River Associates, told CNN that operators were holding back rolling out the third generation structure, and Ericsson was suffering as a result.

He said there would be a lot of pressure on individual governments to intervene and help meet the costs, but he could not see them responding.

Hugh Jagger, a vice president at information technology consultant Cap Gemini Ernst and Young, told CNN that Ericsson's tie-up with Sony earlier this week could be the way forward for the ailing company. "The link with Sony will make it powerful in the future," he said.

He said the there would be a lull of between six and 12 months before the new high-speed services became available.

Ericsson to slash up to 12,000 jobs, warns of loss in second quarter
April 20, 2001

Ericsson - the world-leading supplier in telecommunications
Nokia

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