European mobile phone growth 'unsustainable'

IDC reports that saturation levels have passed 100 per cent.

The western European market for traditional mobile phones and converged device handsets grew by seven per cent year on year in the second quarter of 2006 as shipments reached 41.4 million, analysts reported today.

But this steady growth in demand is unsustainable, according to the latest market data from IDC, as subscriber saturation in most western European markets moves beyond 100 per cent.

IDC noted that converged devices consistently outperformed traditional mobile phones in recent quarters in terms of growth.

But the second quarter of 2006 saw converged device growth only marginally exceed that of traditional mobile phones as portfolio transitioning and device delays inhibited growth.

IDC believes this further points to the strength of the feature phone in western Europe.

"The advantages of an open evolved operating system for manufacturers, operators and developers with regard to cost, time to market and rich customisation are undeniable," said Andrew Brown, program manager for European mobile devices and computing at IDC.

"However, from the perspective of most consumers the advanced capability is still either deemed unnecessary or lies invisible behind considerations such as form factor and multimedia capability."

The result is that consumer-centric converged devices are competing directly with high-end feature phones which, in terms of the most visible technical specifications such as cameras, are generally deemed indistinct from smartphones by most consumers.

"Nokia is undoubtedly making substantial progress with the S60 in the consumer space. But the lack of commercial success other licensees have had with the platform is indicative of the dilemma faced by many vendors," said Geoff Blaber, senior research analyst for European mobile devices at IDC.

"With demand for feature phones still strong the prospect of high initial costs before the advantages of 'platformisation' can be realised is an inhibitor to widespread migration to an evolved OS for consumer devices.

"Technology demands will command the move in the longer term, but the migration is proving slower than vendors, operators and commentators anticipated."

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