Mobile phone sales expected to halve

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The Independent Online

While mobile phone sales are expected to have nearly halved this Christmas, Carphone Warehouse is thought to have extended its lead in selling handsets on the high street.

Latest figures suggest UK mobile sales in the lead up to Christmas will have dropped from 10 million a year ago to about 5.5 million this year, including upgrades. New customers are forecast at just 1.5 million over Christmas.

But despite collapsing sales of handsets as the market becomes saturated, analysts predict that this festive season Carphone Warehouse will have claimed 20 per cent of the market – up from the 12 per cent reported in March. The company will report sales figures for December and January, traditionally another bumper month, towards the end of January.

The four main network providers – Vodafone, Orange, mmO2 and One2One – will have seen shrinking sales in the fourth quarter of 2001. However, Virgin Mobile, a new entrant, is expecting to grow sales by up to 25 per cent over the fourth quarter of last year, and acquire 300,000 new customers this Christmas – beating mmO2, the demerged mobile arm of British Telecommunications. Virgin Mobile gained more net new customers than mmO2 for the first time in the third quarter of 2001.

However, the overall decline in the sector during 2001 was partly engineered by the companies themselves. In May the price of pre-paid phones doubled as operators sought to reduce dependence on this much less profitable segment of the market and decrease the subsidies that were being offered. Handset sales suffered as a consequence.

It costs about £100 for an up-to-date pre-paid handset today – compared with £20 one year ago. Nevertheless, pre-paid handsets, which are particularly popular as gifts, still make up 60 per cent of the market.

"This [pre-paid] move accelerated the inevitable drop in growth, which would have happened anyway as the industry matured. It was a deliberate decision to focus on better quality for customers," said one industry source.

The sector stopped playing the numbers game, which involved grabbing customers at any cost, and concentrated on supplying existing customers new services and taking market shares from rivals.

Worldwide, for 2001 as a whole, Gartner, a research group, estimates 370 million to 400 million handsets were sold – down from 413 million in 2000.