Feature Article

July 30, 2012

As Service Providers Ramp Up 4G Network Investment, Smartphone Sales Fall

As important and as robust as mobile subscriber growth has been over the last decade, it is not invulnerable to economic stress. In fact, on a global basis, mobile handset shipments have declined for two consecutive quarters, according to ABI Research.

According to Strategy Analytics, U.S. smartphone sales dipped five percent in the second quarter of 2012.

An economist, tracking any nation's economic performance, would say that the set of data marks the beginning of a recession. Whether the slower smartphone adoption rate will continue for the balance of 2012, or continue into 2013, is the issue.

Adding to the worry is the fact that the only time device shipments have fallen, in the past decade, was during the Great Recession of 2008. Some might worry that we are seeing that unusual pattern again.

“Handset shipments have not seen a sequential year over year decline since the global economic crisis of 2008 to 2009," says ABI Research senior analyst Michael Morgan.

Of course, handset purchases often are affected by consumers waiting for hot new models to be released, while some might also note that the second quarter is a seasonally slower quarter.

Still, the slowdown has to be worrisome, as mobile operators globally ramp up investment in fourth generation long term evolution networks intended to both support better smartphone experience, and encourage more users to buy mobile broadband services and smartphones.

North American mobile operators will hike capital investment in 2013 to support fourth generation network construction, ABI Research estimates.

Mobile capital investment fluctuates from year to year, based on network upgrade plans, economic conditions and competitive threats, and investment has been building since 2008, partly because of 4G network construction and partly because operators were cautious during the Great Recession.

“North American mobile cellular capital expenditure is expected to hold its ground in 2012 year-on-year, with expenditure of around $10 billion”, says Jake Saunders, VP for forecasting at ABI Research. “In 2013, mobile capital expenditure is likely to surge 4.9 percent to $10.5 billion.

Mobile operators, as typically is the case, squeezed capital expenditure during the economic downturn in order to protect cash flows and maintain profits. What normally happens is a catch-up phase where deferred investment gets made. So the slowdown in smartphone sales is not helpful, to the extent it could signal increasing consumer resistance to device and service upgrades.


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Edited by Brooke Neuman

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