Nokia Targets Handset Replacement Market With New Product Features

It's an age-old question of business economics: How does a company sustain growth when its market begins to reach maturity?

For companies that make handsets for mobile phones, the solution is to attack the replacement market, which consists of subscribers who want to switch or upgrade their mobile phones. So far Finland's Nokia (NOK Quote), already the cell phone market leader, has been most aggressive at introducing phones that appeal to this group, ahead of Motorola (MOT Quote) of the U.S. and Ericsson (ERICY Quote) of Sweden.

The replacement market is looking attractive because more and more people already have cell phones. By the end of this year, roughly 58% of Europeans and about 40% of Americans will carry them, says Herschel Shosteck, president and chief executive of Herschel Shosteck Associates, an international wireless consultancy.

"Where is growth in the industry going to come from?" asks Johan Carlstrom, an analyst at Swedish investment bank Handelsbanken. "From replacements." Carlstrom projects that the number of net new global subscribers will flatten in 2001, while the replacement rate will increase from about 43% this year to as much as 58% in 2003.

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