Mobile
Phones - Australia
HEADLINES
 |
Current value sales grow by 11% in 2009 to reach A$1.7
billion
|
|
Smart phones takes over the category by offering consumers
the opportunity to design a mobile phone with separately bought applications
|
|
3G mobile phones grow by 82% in retail volume sales terms
in 2009
|
|
Mobile phones is the only consumer electronics category to
record upward unit price movement in 2009
|
|
Nokia remains the leading brand in mobile phones in 2009,
while Samsung and iphone perform well
|
|
Sales are expected to grow by an 8% constant value CAGR
over the forecast period, as mobile phones settles into its role as the
ultimate portable converged device
|
TRENDS
|
Mobile phones is the brightest product type in consumer electronics,
as it is the end result of the convergence trend that has incorporated the
functions of cameras and in-car navigation devices, and portable multimedia
players. Since these functions are constantly added to mobile phones, or
particularly 3G smart phones, there continued to be cause for consumers to
upgrade their devices. This created value adding opportunities, whilst also
ensuring that mobile phones does not become a replacement category, despite
existing since the 1980s. For these reasons, sales of mobile phones grew by
6% in retail volume terms in 2009, despite unit prices increasing by 5% in
current value terms, the only category in consumer electronics to experience
upward movement in unit prices.
|
|
Australian consumers continue to be excited about mobile
phones, and it is this excitement that is driving growth rates. There is
plenty for consumers to be excited about, from improved camera functions, to
online access, to touch screens, and, in the case of iphone, the ability to
add other functions through the purchase of an “application” from its iTunes
store. Although many consumers still “just want a phone” the constantly
growing list of functions has driven retail value sales growth. The eagerness
with which many consumers desire “smart phones” or at least phones with the
latest functions is shown by the fact that around 70% of new phones are in
the 3G format.
|
|
Australian consumers have embraced 3G mobile phones and
the applications offered, to the extent that the demand for services is
rapidly exceeding the ability of the spectrum to respond. As a result, 2009
was the year in which the number of 3G mobile phones sold exceeded sales of
2G and 2.5G mobile phones. Australian consumers have therefore well and truly
embraced 3G technology.
|
|
Pay as You Go, typically known as “pre-paid” services,
grew in popularity in 2009, accounting for a 42% share of retail volume sales
in 2009. Although monthly subscription remained the leader with a 56% share.
Pay as You Go increased its retail volume share by one and a half percentage
points in 2009, partly at the expense of monthly subscription, primarily
because consumers were concerned about staying within budget during the
economic slowdown in Australia.
|
|
The importance of a mobile phone is underlined by the fact
that it represents the main source of communication for many consumers, used
far more than a landline phone, and, in many cases, is the only phone in the
household, as the number of landline phones in Australia is declining.
Although many landline phones are being replaced by Skype and other VOIP
services, a mobile phone, is for many consumers, the only phone they posses.
This makes consumers particularly receptive to any news about mobile phones,
ensuring that new functions and designs are well publicised and consumers are
eager to upgrade their phones quite often. Thus, the penetration of new
functions is rapid in Australia.
|
|
Most Australian consumers purchase phones subsidised by
their mobile phone carrier – typically either Telstra, Optus, Vodaphone or 3
Mobile – which significantly lowers the price paid by the consumer. Or, at
least, the cost to the consumer is spread out over the term of the contract.
This encourages Australians to upgrade their mobile phone. This is changing,
however, with some consumers buying an iphone directly from Apple Computer,
thereby creating a market for mobile phone carriers to offer “BYO” – bring
your own – deals. Therefore, although mobile phones are available from many
of the main electronics and appliance specialist retailers, such as Harvey
Norman and Dick Smith Electronics, they are generally purchased from the
retail arm of the consumers mobile phone carrier, or specialist mobile phone
retailers such as Allphones, Crazy Johns and Telechoice.
|
COMPETITIVE LANDSCAPE
|
Although Nokia has retained its position as the most
popular mobile phone brand, it is under intense competition from the more
ambitious range of smart phones from Samsung and the iphone. Nokia has made
some strategic mistakes, focusing too much on the market for affordable
business phones, trying to position itself as price competitive Blackberry,
thereby largely ignoring advances such as touch screens which have been
popular in the consumer channel. Nokia, did, however begin to initiate a comeback
in 2009. This occurred through a new focus on social media applications such
as Facebook status updates, particularly with the N97 mini, which has been
aggressively promoted with the slogan “made for apps”. This may not be enough
for Nokia, however, since the competition is likely to become more intense
once Google phones are released, with many of the early models coming from
the previously little-known HTC. Most notable is HTC Desire, the most
anticipated mobile phone release since iphone.
|
|
Samsung has focused on smart phones in an attempt to add
value, resist price erosion, and exploit the growing consumer need for a
converged device. The brand has been especially assertive in promoting its
smart phone range, with heavy promotion of the Icon subbrand, through models
such as Galaxy Icon and HD Icon.
|
|
Looking into the future, Samsung has even developed its
own platform, Bada, to run its phones on. The Microsoft platform that Samsung
‘s mobile phones previously ran on is no longer regarded as competitive or
exciting for consumers. Although experts are finding it difficult to get
excited about the new platform, Bada will allow Samsung to produce smart
phones at more affordable prices, which will excite consumers.
|
|
While iphone was already popular in 2008, the new
generation 3G iphone released in 2009 turned the brand into the default
choice for consumers looking for a smart phone. This preference has been
boosted by the fact that updates to Facebook or Twitter using iphone are
announced, a privilege that other brands do not receive. This has frustrated
the efforts of other brands to compete in the smart phone category.
|
|
The reason for the success of iphone, and the likely
success of HTC Desire and other Google Android phones, is due to offering
smart phone technology, previously popular among business customers, in a
form that is attractive to consumers. At the same time, the improved
availability of 3G services is making these functions possible, although a
lack of an adequate spectrum may retard growth over the forecast period. With
mobile internet a crucial part of the Google phone experience, there will be
a need to manage the array of communications that consumers receive. Facebook
and Twitter management is therefore becoming an increasingly important part
of mobile phone use and the means by which manufacturers compete for brand
shares.
|
PROSPECTS
|
As the number of functions and applications available on
mobile phones increases, the average unit price is expected to rise by a 3%
constant value CAGR to reach A$256 in 2014. Mobile phones is the only
consumer electronics category predicted to record upward movement in unit
prices over the forecast period. Unit price growth is possible as mobile
phones are typically sold as part of a “plan” in which the price of the
device is both subsidised and spread out over a period of time. A common
option is 2-years, as consumers tend to desire another mobile phone after
this length of time. Whilst subsidising has assisted in encouraging and facilitating
the growth of mobile phones, it also allows consumers to upgrade their mobile
phones to a greater extent than otherwise would be the case.
|
|
At the same time, other factors that suppress the unit
price of mobile phones are expected to emerge. Although mobile phones are
increasingly able to facilitate many functions, a growing number of these
functions do not come with the device, but are purchased afterwards as
“applications.” In this way, consumers are able to design their own mobile
phones. This model was popularised by iphone and it is likely to be adopted
by other manufacturers as well. With many of the functions of a mobile phone
purchased after purchase on a need-by-need tailor-made basis, the price of
phones is restrained to an extent. This also encourage more consumers who
otherwise would not perceive the need to purchase a smart phone to take the
plunge without all the applications, realising that they can collect these
applications at their own pace.
|
|
With 3G applications a major driver of sales, and the
primary reason why consumers regularly upgrade their mobile phone, it is
crucial that consumers can continue to use these applications easily. This
ability, however, is likely to be retarded over the forecast period due to
the demand for applications increasingly being greater than the spectrum that
makes it possible. This factor is made more serious by netbooks, and
increasingly laptops, using the same spectrum. The situation is likely to
improve in 2013, as the switch-off of analogue television will free-up some
of the spectrum.
|
|
The freed-up space is expected to be allocated to the
telecommunications industry, although other interests are also lobbying the
Australian government for use of this “digital dividend”. Nonetheless, it is
likely that the demand for applications will outpace the supply of spectrum
for it to run on. Should this occur, mobile phones will experience a slowdown
in retail value growth in particular, since premium models with many
applications will be most vulnerable. Moreover, categories such as in-car
navigation and cameras, which have experienced encroachment by mobile phones,
will receive a reprieve.
|
|
Google Android, due to its “open source nature” and
ability to be customised, will be all about bringing online functions to
mobile phones, something that Apple Computer already does through iphone.
However, Google’s dedication to making information easily available will
excite many consumers, with applications such as Google Goggles likely to be
eagerly embraced as it becomes more and more detailed. Google Android will,
however, be available through a variety of manufacturers, with HTC looking
like being the primary Android brand in the short term. This will provide a
good introduction to what is likely to be a very significant player in
Australia over the forecast period. Also, as Google and Apple Computer
compete in mobile phones, the focus is on the interaction of mobile phones
with the internet. Therefore many of the major drivers of traffic – such as
Facebook or YouTube – to the internet will be replicated on mobile phones, to
the extent that the next social media phenomenon may be mobile phone-based.
|
