Can smartphones save the mobile telecoms world?

The last quarter of 2008 was a dark time for handset vendors. Even Nokia, the bellwether manufacturer, sold 15 per cent less in Q4 than a year ago, while Sony Ericsson saw its Q4/08 sales dive by over 20 per cent compared to Q4/07.

This dramatic downturn has forced the handset community to rapidly rethink its marketing strategy for 2009, with many believing smartphones will provide a fresh revenue stream and, more importantly, improve overall profitability.

Central to this plan is to satisfy the growing demand for smartphones by consumers--albeit that this user segment might have little understanding of the capabilities of a smartphone or the punishing charges that can accrue with data downloads. But, Nokia has already indicated it will expand the definition of smartphones this year and we should expect to see its Ovi services appearing on new platforms at prices designed to appeal directly to the consumer.

Google's Android OS is also being positioned as a key player for smartphones with all the top five handset vendors, with the exception of Nokia, expected to make aggressive moves in the marketplace using this OS. Countering these efforts will be RIM and Apple who seem certain to continue their push into the consumer segment with their proven products, but in such a manner that does not cripple their profitability.

But even the seemingly invincible iPhone hit the rocks in Q4 with shipments dropping to 4.4 million handsets, compared to nearly 7 million in the previous quarter--a problem caused, apparently, by resellers being left with huge inventory from Q3.

iPhone watchers are convinced that Apple will widen its handset portfolio during the first half of this year with the likelihood of a more consumer-focused device being added. However, given the company's statement that it will not lower its smartphone prices to compete, a product based upon a new form factor could neatly fill the gap.

Indications that the smartphone market is undergoing a rapid overhaul will become apparent at this month's Mobile World Congress in Barcelona. Details are already being leaked by both established and new entrants concerning smartphone announcements--evidence that these new handsets have generated real interest in the broad consumer market which will be followed in minute detail by marketing managers within the operator and handset vendor communities.-Paul