­The Western European mobile phone industry felt the impact of the global financial crisis in the third quarter of 2008, as total handset shipments decreased significantly over previous quarters. Mobile phone manufacturers shipped 45.8 million handsets in 3Q08, down 8.0% from the previous year and up 5.1% over 2Q08. The third quarter has historically been a ramp-up period as manufacturers load their sales channels with handsets in preparation for the holiday season, resulting in year-on-year growth as high as 20%. However, this year has not witnessed a similar ramp up, largely due to the current economic situation.

"Mobile phone manufactures felt the pressure of the gloomy economy in 3Q08, and as a result shipments were down significantly. Consumers are delaying replacing handsets, which is lowering replacement rates in Western Europe. This is particularly significant in countries where penetration rates are over 100%," said Francisco Jeronimo, research manager with IDC's European Quarterly Mobile Phone Tracker.

While the overall mobile phone market in Western Europe registered negative growth compared to the previous year, the market for converged mobile devices (commonly know as smart phones) posted a 58.0% increase year on year and 17.9% sequentially. "The release of the iPhone 3G earlier this summer in 15 European countries not only marked a major step for Apple but also raised interest in converged mobile devices as a whole, and particularly among consumers, not just enterprises," said Jeronimo.

Looking ahead to the holiday season, mobile phone average selling prices (ASPs) have already begun to drop and marketing campaigns to ramp up. Competition for buyers will remain high, as consumers will be spending more carefully. However, slower growth in the third quarter and tight economic conditions will make 2009 slower and more competitive.

Nokia remained the market leader with a 34.9% market share, but continued to lose to Samsung, which has a market share of 28.1%. Even so, Nokia remains in a strong position, with its brand, cost structure, and operations assuring continued success. As for devices, Nokia is looking to its E71, N95, and the recently announced 5800 XpressMusic to gain attention in the holiday quarter. Samsung saw success across its product portfolio, receiving a warm reception for its feature phones such as the popular touchscreen-capable Omnia and its entry-level devices. An aggressive pricing strategy and massive marketing campaigns in all European countries were key to its success. Samsung's ASP dropped 6.2% from €113 to €106.

Sony Ericsson remained in third place with a market share of 15.3%, despite ongoing restructuring across the company and a net loss for the quarter. At the same time, Sony Ericsson's ASPs continued to sink, reaching €109 for the quarter. More operational realignment is expected in 1H09 before results are seen in the second half of the year.

Motorola took another step towards reversing its fortunes, hiring Qualcomm's Sanjay Jha to lead its mobile devices division in summer 2008. Since then, Jha has sought to rationalize the division's supply chain, platforms, and research and development in order to restore the company's luster. More challenges remain as Motorola's volumes are still a fraction of what they used to be and the division posted another quarter of operating loss. Motorola's shipments dropped 48.8% year on year and the market share dropped to 4.6% from 6.6% in 2Q08.

LG Electronics slipped into fifth place during the quarter, citing unit shipment declines in Europe. Market share decreased to 4.4% from 6.2% in the previous quarter. Even so, LG has been meeting consumer demand for messaging, touchscreen, and music devices, which has driven strong revenue growth from the same quarter in the previous year as well as a double-digit operating margin. Key devices for LG during the quarter included the Secret, Viewty, and the low-entry KP100. Shipments in 4Q are expected to grow and contribute to operating profit. New devices including "Renoir," an 8MP camera phone, the second version of the "PRADA phone by LG," and the KP500, a midtier full-touch phone, will be unveiled in the coming quarter.

Apple reported an excellent quarter, with a good performance by the new iPhone 3G, which was released on July 11 in 21 countries across Europe. The device helped to pull up market share from 0.4% in 2Q08 to 4.3% in the third quarter.

Top 5 Mobile Phone Vendors, Shipments, and Market Share, 3Q08 (M)

 Source: IDC European Quarterly Mobile Phone Tracker, November 3, 2008

Note: Vendor shipments are branded shipments and exclude OEM sales for all vendors.

Source:cellular-news