Smartphones offer hope in declining cell phone biz

Cell phone sales around the world took a nose dive in the fourth quarter, as the weakened economy hurt demand for new devices. But sales of smartphones continued to grow.  According to IDC, overall sales of cell phones in the fourth quarter were down about 12.6 percent compared to the fourth quarter of 2007. In the fourth quarter of 2008, manufacturers shipped a total of 289.0 million units, compared to 330.8 million units shipped during the fourth quarter a year ago. ''The fourth quarter was the perfect storm of factors to produce this result,'' Ramon Llamas, senior research analyst at IDC's Mobile Devices Technology and Trends team, said in a statement. ''A combination of weak end-user demand, currency volatility, and limited credit availability prevented the market from experiencing the usual seasonal increase in shipments." Llamas went on to say he expects the first half of 2009 to be challenging for cell phone makers as they attempt to clear their inventory. And he said the market might not recover until later in 2009 and possibly not until 2010. The one bright spot in the entire market was smartphones. These devices, which use advanced operating systems and provide Internet access and other data services like e-mail, were the hottest-selling devices in the fourth quarter. Device makers grew sales of these advanced phones by 22.5 percent compared to the fourth quarter of 2007, IDC reported. In North America, smartphone sales were up by about 70.1 percent, and in Europe, the Middle East, and Africa, sales were up about 25 percent. "As long as operators are able to continue to subsidize these devices, and developers continue to enhance applications, then this segment will be a silver lining to an otherwise gloomy market,'' Ryan Reith, senior research analyst with IDC's Mobile Phone Tracker, said in a statement. Worldwide smartphone growth was fueled by traditional handset makers, such as Nokia, which still ranks as the No. 1 manufacturer in the world, but it also got a boost from newer players, such as Apple and Research In Motion, Reith said. That said, Reith also noted that the fourth quarter also highlighted the need for manufacturers to diversify their product lines within the smartphone category. He used Apple as an example. In the third quarter, Apple blew the doors wide open, selling about 6.9 million new iPhones worldwide in the quarter. But shipments slowed in the fourth quarter, and the company sold only about 4.3 million new iPhones. Meanwhile, Research In Motion, which sells several different versions of its BlackBerry devices, actually grew sales from about 6.1 million devices at the end of its fiscal second quarter to 6.7 million devices in its fiscal third quarter, which ended November 29. The company's fiscal fourth quarter ends February 28. "I think everyone, including Apple, knew the initial bump in iPhone sales wasn't sustainable," Reith said. "And RIM's success shows the importance of a diverse product portfolio, where different products with different price points are sold across multiple carriers." Moving forward, the smartphone market looks like the place to be. And Reith expects traditional manufacturers to focus attention there. He also believes that operators will try to further drive this market by increasing the subsidy on devices to spur adoption. The reason is simple: mobile operators are making a lot of money on the data services they sell with these devices. That recurring revenue stream is worth the extra subsidy. Verizon Wireless reported last week that much of the growth it experienced in the fourth quarter came from data services. The average revenue per user for data services was up 27.9 percent for the quarter, compared to the same quarter a year ago. The company also said 37 percent of new retail devices sold during the quarter were smartphones. AT&T, which activated 1.9 million iPhones during the quarter, saw its wireless-data revenue grow 51.2 percent during the quarter. AT&T noted that the fourth quarter marked the 12th consecutive quarter that wireless-data revenue grew at a rate above 50 percent. And the company said its iPhone users, in particular, generate about 1.6 times more revenue than the average AT&T customer.

• AT&T eyes divested Alltel assets

Smartphones offer hope in declining cell phone biz

Cell phone sales around the world took a nose dive in the fourth quarter, as the weakened economy hurt demand for new devices. But sales of smartphones continued to grow.  According to IDC, overall sales of cell phones in the fourth quarter were down about 12.6 percent compared to the fourth quarter of 2007. In the fourth quarter of 2008, manufacturers shipped a total of 289.0 million units, compared to 330.8 million units shipped during the fourth quarter a year ago. ''The fourth quarter was the perfect storm of factors to produce this result,'' Ramon Llamas, senior research analyst at IDC's Mobile Devices Technology and Trends team, said in a statement. ''A combination of weak end-user demand, currency volatility, and limited credit availability prevented the market from experiencing the usual seasonal increase in shipments." Llamas went on to say he expects the first half of 2009 to be challenging for cell phone makers as they attempt to clear their inventory. And he said the market might not recover until later in 2009 and possibly not until 2010. The one bright spot in the entire market was smartphones. These devices, which use advanced operating systems and provide Internet access and other data services like e-mail, were the hottest-selling devices in the fourth quarter. Device makers grew sales of these advanced phones by 22.5 percent compared to the fourth quarter of 2007, IDC reported. In North America, smartphone sales were up by about 70.1 percent, and in Europe, the Middle East, and Africa, sales were up about 25 percent. "As long as operators are able to continue to subsidize these devices, and developers continue to enhance applications, then this segment will be a silver lining to an otherwise gloomy market,'' Ryan Reith, senior research analyst with IDC's Mobile Phone Tracker, said in a statement. Worldwide smartphone growth was fueled by traditional handset makers, such as Nokia, which still ranks as the No. 1 manufacturer in the world, but it also got a boost from newer players, such as Apple and Research In Motion, Reith said. That said, Reith also noted that the fourth quarter also highlighted the need for manufacturers to diversify their product lines within the smartphone category. He used Apple as an example. In the third quarter, Apple blew the doors wide open, selling about 6.9 million new iPhones worldwide in the quarter. But shipments slowed in the fourth quarter, and the company sold only about 4.3 million new iPhones. Meanwhile, Research In Motion, which sells several different versions of its BlackBerry devices, actually grew sales from about 6.1 million devices at the end of its fiscal second quarter to 6.7 million devices in its fiscal third quarter, which ended November 29. The company's fiscal fourth quarter ends February 28. "I think everyone, including Apple, knew the initial bump in iPhone sales wasn't sustainable," Reith said. "And RIM's success shows the importance of a diverse product portfolio, where different products with different price points are sold across multiple carriers." Moving forward, the smartphone market looks like the place to be. And Reith expects traditional manufacturers to focus attention there. He also believes that operators will try to further drive this market by increasing the subsidy on devices to spur adoption. The reason is simple: mobile operators are making a lot of money on the data services they sell with these devices. That recurring revenue stream is worth the extra subsidy. Verizon Wireless reported last week that much of the growth it experienced in the fourth quarter came from data services. The average revenue per user for data services was up 27.9 percent for the quarter, compared to the same quarter a year ago. The company also said 37 percent of new retail devices sold during the quarter were smartphones. AT&T, which activated 1.9 million iPhones during the quarter, saw its wireless-data revenue grow 51.2 percent during the quarter. AT&T noted that the fourth quarter marked the 12th consecutive quarter that wireless-data revenue grew at a rate above 50 percent. And the company said its iPhone users, in particular, generate about 1.6 times more revenue than the average AT&T customer.

• AT&T eyes divested Alltel assets

AT&T eyes divested Alltel assets

AT&T could end up with the lion's share of the wireless assets that Verizon Wireless must get rid of as part of its acquisition of Alltel, The Wall Street Journal reported Wednesday. The newspaper cites sources who said that AT&T is among several bidders hoping to get their hands on the Alltel subscribers and network. The private-equity firms Carlyle Group and Kohlberg Kravis & Roberts & Co., supposedly are bidding on the assets together as is Providence Equity Partners on its own. At least one cable provider also has expressed interest, the Journal says. In order to close its $28.1 billion acquisition of Alltel, Verizon Wireless agreed to sell off assets in 22 states to appease regulators. Included in these assets are 2.1 million wireless subscribers and wireless spectrum and equipment valued at around $3 billion. AT&T is considered to be in the strongest position to bid on the assets, but consumer advocates and rural phone companies say that allowing AT&T to purchase these assets is bad for consumers. Verizon Wireless and AT&T are the No. 1 and No. 2 wireless operators in the U.S., respectively. Together, they have over 160 million subscribers and account for nearly 60 percent of all cell phone service in the country. Critics, such as Gigi Sohn of Public Knowledge, told the Journal that Alltel's assets should end up with a smaller wireless player to spur more competition, rather than allowing the second largest operator to gobble up more customers and spectrum. Rural trade groups believe that AT&T could charge expensive roaming rates to other smaller carriers in these regions, which could affect competitive pricing for consumers. Even if AT&T ends up as the highest bidder for the assets, the deal still has to be approved by the U.S. Department of Justice. But because the deal will likely be evaluated market by market, AT&T could still end up with a significant amount of the assets if it is bidding for assets where it doesn't have a strong presence already. Some people, such as Dan Meyer at RCR Wireless, argue that AT&T buying the divested Alltel assets might not be such a bad thing for consumers. Alltel primarily operates in rural markets, where national carriers don't offer service. And some of these consumers might be happy to have another national operator, such as AT&T, he said. But the biggest benefit for rural consumers is that they could finally be able to get the Apple iPhone. AT&T is the exclusive carrier for the iPhone and many people in rural markets have complained that this exclusivity agreement has prohibited them from having access to the latest and greatest technology. While the real policy issue here centers around exclusivity deals, the fact remains that a big group of people want the iPhone and can't get it because AT&T isn't offered in their market.So even though allowing AT&T to gobble up more spectrum and assets may hurt smaller wireless operators and could ultimately drive up wireless prices, I'm sure there are plenty of people living in rural areas where AT&T doesn't offer service today who would be more than happy for the chance to have an iPhone. What do you think?

• AT& amp ;T reportedly eyeing post-merger Verizon Wireless assets

AT&T reportedly eyeing post-merger Verizon Wireless assets

As you may recall, one of the requirements that Verizon had to agree with in order to complete its little acquisition of Alltel was that it must offload some $3 billion in wireless assets to avoid becoming too monolithic, and it looks like there's already a number of bidders angling for a piece of the action. The biggest of those, by far, is AT&T, which is apparently looking to pick up as big a chunk of the assets as it is able to and, according to The Wall Street Journal, it's in a good position to do just that. Other interested parties reportedly include a joint bid from the Carlyle Group and Kohlberg Kravis & Roberts & Co, a separate bid from Providence Equity Partners LLC, and at least one unnamed cable provider. Any of those bids, however, would still be subject to approval by the Department of Justice, with AT&T sure to draw the most scrutiny of the lot.

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Vodafone reports 14 percent rise in revenue

Things may not be entirely awesome for most operators these days, but at least Vodafone's making some cash in this cash-strapped market. according to its most recent quarterly results, the outfit has notched a 14 percent increase in revenue, which was helped by the weak pound and exceptional sales in India. More specifically, it realized sales of ?10.47 billion ($14.9 billion) compared to ?9.16 billion ($13.06 billion) a year prior. Also of note, Voda was thanking data revenue profusely, as said category rose over 25 percent on an organic basis. Nevertheless, the good news prompted it to raise its expectations for the next quarter, which ain't happening too often these days. All the minutiae is parked in the read link.

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Verizon axing Test Drive, making New Every Two program less awesome

Verizon Wireless certainly isn't planning a romantic weekend with its customers this Valentine's Day, as it's completely nixing its Test Drive program and slashing benefits on its New Every Two initiative. Or, it will if documents rounded up by Boy Genius Report prove accurate. Currently, prospective subscribers who'd like to test out Verizon's network for a month without worrying over usage fees can do so; after February 15th, they can kiss that option goodbye, as anyone who signs up and ports out within a month will have to pay for their wireless access and usage charges during that window. On the same day, a few changes in the NE2 program will also go into effect, and while we'll point you to the read link for all the details, here's the skinny: the discounts you once got are being lessened. Awesome.