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The equations in the mobile phone market are changing steadily as players push the limits of technology and design
Nazia Khan

The appetite for mobile phones, elevated from the territory of communication devices and ensconced in the land that makes for personal statements, is so energetic that it has propelled mobile telephony in the hot list of the fastest growing industries in the world. According to research firm Gartner, worldwide shipments of cell phones rose 23.8 per cent in the first quarter of 2006 compared to the same period last year. A total of 224mn units were shipped during the period.

By the end of 2005, the total number of mobile phone subscribers in the world had reached two billion. The figure is expected to reach three billion subscribers by the year 2008. And the Middle East is one of the fastest growing areas in terms of mobile phone penetration in the world. The growth rate in the region – 162 per cent – is the highest in the world. Not surprising then that most mobile phone vendors, firmly established as well as relatively fledgling, have their focus here. Currently, Nokia leads the market. But chasing after the Finnish company with all they’ve got are Motorola, Samsung, LG and Sony Ericsson, among other players.

Making statements
Providing choices across entry-level, mid and high-end segments, urging customers to aspire to make the ascending shift through categories, is what the mobile game is all about. Brand perception, in particular, is what maintains the market equation – a fact that the companies understand well enough. Sudhir Nair, senior marketing manager, Middle and Near East, Nokia Middle East and Africa, sees Nokia’s portfolio as increasingly becoming an expression of specific lifestyles. “We provide a phone for every pocket – from the basic entry phones like 2610 and 2630, through to the collection for fashion-conscious consumers such as Nokia 7360 and Nokia 7380, the Nseries range for the more technology-oriented consu-mers, right through to the highly sophisticated consumers who enjoy having a high-end phone such as the Nokia 8800. For business oriented consumers, we have the Nokia 9300 smartphone, the 9500 Communicator and the newly introduced Eseries range.”

That variety is what most competitors, who previously concentrated on niches, are hoping to achieve as well. Says K W Kim, president of LG Electronics Middle East & Africa, “In the past, our marketing strategy had involved an aggressive focus on the premium segment. In the process, we neglected the real market. But from the second half of last year, we started preparing for products in the medium segment. And now we have a comprehensive product range.”

Motorola, which was actually the first company to introduce a cellphone, has also changed to make its products more inclusive. Says Jayanta Borpujari, divisional manager, Khimji Ramdas Computer and Communica-tion Systems, official distributors for Motorola in Oman, “The high-end market is brand specific, image sensitive and trend conscious. That is where Motorola has traditionally been very strong. The mid-range was never particularly Motorola’s forte. Now, the comp-any has a formidable range to offer. We are also planning to introduce some more entry-level phones in the market. The pricing will be very competitive there.”

Staying focused
For Samsung, which sees itself playing in the mid and high segments, continuously laun-ching models in various categories like the Ultra Slim series – X820, D900 and D830, the MS OS based phones – i750 and i320 and the clamshell phones, is the way to combat competition. Sandeep Saihgal, senior sales and marketing manager, mobile division, Samsung Gulf Electronics, sees this market as more fashion-centric than data-centric. “Design and technology are deciding factors for a customer buying a mobile phone. Pricing is not nearly as important.”

That is a philosophy that finds an echo in Sony Ericsson’s products as well. The company’s low-end products aren’t, in fact, low-end. All phones in the vendor’s entry-level portfolio come with colour display and polyphonic features. As Jayaprakash Menon, general mana-ger, Bahwan Electronics, distributors for Sony Ericsson, points out, “The lowest-costing Sony Ericsson phone would be roughly 25 per cent more expensive than the cheapest Nokia phone.” But a strong mid-range, with camera and Walkman phones that combine the best of Ericsson’s telephony strengths and Sony’s entertainment skills, work for the joint entity. Continues Menon, “Sony Ericsson has always been driven by technology and features. They prefer not to compete on price points. Mid-range and high-end products drive sales. While all manufacturers would definitely be interested in volumes, Sony Ericsson tends to lean towards qualitative market penetration, than chase sheer numbers. This approach is apparent in the model line-up.”

A similar hybrid is BenQMobile, established following BenQ Corporation’s acquisition of Siemens Mobile Devices. The company has announced that at least a third of its products launched in 2006 will be 3G and that there will be a significant focus on multimedia; with every three out of four products featuring a music player or FM radio and every second phone offering a minimum 1.3 mega pixel camera. From a design perspective, BenQ-Siemens hopes to create devices that build on the respective expertise of the two companies; the former’s award-winning designs and the latter’s reputation for inventiveness, for introducing both the first slider and mp3-phone. But the new entity, which has the lowest average selling price compared to Nokia, Motorola, Samsung, Sony Ericsson and LG, had just 3.5 per cent of the global market in the first quarter of 2006. That’s down from a 7.6 per cent share for Siemens alone a year ago, showing that there’s still time for the merger to take off.

One up in the sweepstakes
The next ‘must-have product’, with cult-developing potential with regards to design as well as inventiveness, is what all companies are hoping to come up with. The market has seen how one breakout phone can provide the fuel to close the gap between players, and it is laying its bets that such success can be repea-ted. The Moto Razr V3, with millions of sets sold worldwide, has spearheaded Motorola’s march towards the top. Adds Borpujari, “The company is capitalising on this success. The V3 is now available in ‘candy bar’ form as well. The design is now affordable for a much larger cross-section of society.” Motorola is now complementing the continuing success of phones on the Razr platform with a turn towards unabashed elitism. Borpujari describes the new V3i Dolce & Gabbana phone as one of the marketing strategies that Motorola is adopting. “It is identifying high technology with high fashion. You won’t find a regular promotional campaign for this product. It’ll be a very personalised campaign.”
LG is hoping that its Chocolate phone, part of its Black Label series, will create its sweet spot in the market, although Kim doesn’t believe that the market can be conquered by one phone. “It’s not easy to break market domination. We will have to keep introducing newer models. People now see mobile phones as an extension of their personality.”

There’s no price too high to pay to turn one’s personality upwardly mobile and that’s the value that Kim says LG is chasing after. He adds that the company will soon be introducing basic phones, around US$100 in price, to further extend its portfolio.

Adds Nair about Nokia’s strategy to maint-ain its leadership in the market, “We will continue to provide our customer’s with the widest portfolio in the mobile industry, so that each consumer can find the most suitable device according to his personal needs when it comes to design and features applications, from local languages and Islamic calendar to business applications like mobile e-mail with the Eseries range, as well as price range.”

Getting the right portfolio balance is the key to advancement in the market. New handsets will substantially assist market volume growth, but the challenge for vendors will be to meet differing segment requirements without over-extending the portfolio and adversely affecting margins.

Future cell
Keeping all these factors in mind, it’s still not easy to make predictions about the mobile phone market of the future. Will a company like Nokia, whose brand is more or less synonymous with cellphones, continue to have an edge over companies like Motorola, which means everything from communications equipment to global satellite systems, and LG, which sells products ranging from televisions and air conditioners to refrigerators? LG’s Kim isn’t sure. “We’re seen as a good brand in those products. But it’s difficult to change consumer perceptions. We will continue to communicate with them to bring that same feeling for our mobile phones.”

Meanwhile, there is also a point of view that the more things are different, the more they are the same. Believes Borpujari, “This is not a very big market. You see new brands appear at very low prices in hypermarkets. But they disappear after a few months. Since prices of handsets from established brands have become very economical, it is very difficult for new brands to come in and influence buying decisions. It’s too much investment for a share in too small a pie. This entry barrier is likely to make it difficult for a new player to come in and change existing images and perceptions. I don’t see many doing it, unless someone adopts Oman as a test market and commits to heavy investment. More likely, you would see Motorolas and Nokias in the market consolidate and fight for additional market share.”

Menon believes that the gap between the leading players will close in the future. “But it’s difficult to take a call as to what period of time this will happen over.” Brand fatigue is bound to set in at some point to make for some interesting if not outright dramatic changes.

Meanwhile, the bounty will only get more tech-driven for customers, as companies work to offer state-of-the-art features on handsets that get sleeker and faster. Nair expects to see continued demand for advanced products, such as camera phones, 3G/WCDMA devices, smartphones and other mobile multimedia devices and services.

He predicts, “But voice will remain key in countries where there are significant growth rates in terms of mobile penetration. Mobile photography or imaging and mobile video will continue to evolve and develop and will create significant opportunities in the imaging and broadcast arena.” Samsung’s Saihgal thinks that operators will have an increasing influence in the years to come.

What is also expected is that regulators will bring in stricter measures to combat the influence that the grey market has in the scheme of things. With consumers spending more and more on their handsets, it is needed that their interests be protected by companies as well as authorities working to ensure that only legitimate products are sold.

Meanwhile, there is a general understanding that the basic utility of a mobile phone is lar-gely a thing of the past. For those who get their kicks out of the fun element that a mobile phone provides – music, camera and games, to the tech-obsessed community, to a user who wants a combination of all there is, the scene looks better than ever, and the choice gets as wide as can be enjoyed. The future of the mobile phone market is one to watch out for not just because it is one of the fastest growing, but also because it is one of the most interesting.