In-Stat: Weaker replacement handset sales could hit industry

Replacement handset sales, which will make up three quarters of the handset market over the next two years, may be a weak point for the wireless industry as it tries to rebound from the economic recession, according to In-Stat. Slowing subscription rates combined with economic hardship will make it harder for the wireless industry to grow over the next two years as consumers look at replacement handsets as "a discretionary purchase that can be delayed in times of economic hardship."

However, the bright spot for carriers and vendors alike, according to In-Stat, is that advances in wireless technologies such as Long Term Evolution (LTE) will be key drivers for renewed growth.

"Revenues will recover more rapidly than shipments due to sales of cellphones with new technology (LTE and TD-SCDMA) that command higher prices," according to Allen Nogee, an In-Stat analyst. "The increased penetration of higher-priced smartphones, particularly in the United States, will speed revenue recovery as well."

The firm is predicting a 20 percent drop-off in the handset market in 2009, much more dire that industry leader Nokia's prediction for a 10 percent contraction.

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