Report: Economic downturn will hammer handset sales

Plenty of analyst firms have said that 2009 will be a weaker year for handset sales, but Informa Telecoms & Media has added more gloom to the picture--the firm now predicts that because of the economic downturn, 1.04 billion fewer devices will be sold over the next five years.

The firm has revised its outlook for the next five years down 14 percent. The company said that growth is expected to pick up in 2010, but that it won't be until 2011 when the handset market recovers to 2008 levels. The one bright spot that Informa found in its new research was that sales of high-end phones will outpace low-end phones in 2009, which could be a boon to vendors looking to boost margins and carriers hoping to increase data revenue.

Nokia, the leading handset vendor by market share, has predicted that handset sales will fall 10 percent across the industry this year, and other handset makers have said they expect the market to contract this year at around that level or a by a few percentage points less.

The economic downturn will have other effects as well, Informa said. Customers are expected to keep their handsets for six to nine months longer they have in the past, prolonging the replacement cycle, and carriers are likely to move away from aggressive handset subsidies. Other firms have pointed out that weaker replacement sales could spell trouble for a market that will increasingly rely on such sales, due to increased penetration rates, over the next few years.

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