Wireless Use Up, Growth Slowing

Worldwide mobile phone sales totaled 412.7 million units in 2000, a 45.5% increase over
1999 results, according to San Jose-based Dataquest, a unit of Gartner Group.

Despite the growth, however, the future of the industry is not entirely clear.

“Persistent rumors of a market slowdown that dogged the industry throughout the year started
to prove true toward the end of 2000,” explains Bryan Prohm, senior analyst for Dataquest’s
worldwide telecommunications group. “The afterburners that propelled several years of
consistently high growth rates now suddenly seem to have been switched off.”

Indeed, there was some significant stock carry-over to the beginning of 2001, meaning the
number of total shipments in 2000 was about six million units lower than previous estimates.

Nokia strengthened its lead as the No. 1 vendor in the market during 2000 with shipments
growing 66% over 1999 (see below). Much of the company’s success was attributed to a
strong second half in 2000, when 59% of sales occurred.

Prohm calls 2000 a transitional year for the mobile phone industry, citing reports from
Dataquest that identify a number of issues affecting growth in the industry. Among these were
global capacity catching up with demand as lowered barriers to entry allowed an influx of
smaller manufacturers that were able to exploit some of the key Far Eastern markets,
specifically China. Wireless application protocol (WAP) also failed to impress mobile users,
and thus what had been anointed as the catalyst for the next wave of terminal sales growth
turned out to be a little more than a ripple. Finally, mobile operators began to shift attention
away from straightforward subscriber acquisition to a greater focus on lifetime customer loyalty.

“The long-term prospects for the mobile sector look tough,” says Peter Richardson, principal
analyst for Dataquest’s worldwide telecommunications group. “Few manufacturers are able to
generate healthy profit margins, placing the necessary investments in next-generation handsets
developments at risk. The smart money may be riding on players that are unfamiliar with the
upper echelon vendors.”

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