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Cell-Phones Set for Slowdown

A research firm sees single-digit subscriber growth ahead.

Cell-phone carriers and handset makers could be in for a bumpy ride.

After rising by an average of 25% in the last three years, global mobile-phone subscriber growth is set for a significant slowdown, says industry research firm iSuppli.

Cell-phone subscriber growth worldwide could decelerate to 12.8% this year -- nearly half what the industry posted in each of the last three years.

What's more, subscriber growth could further drop to 9.6% in 2008, to 7% in 2009 and to 5.7% in 2010, forecasts iSuppli.

North America, Japan and South Korea are reaching near saturation of mobile-phone subscribers, the firm says. In 2006, North America achieved a 93.2% penetration of the population, with South Korea at 83.2% and Japan at 74.2%

That means carriers have to figure out new ways to maintain revenue growth with fewer new mobile-phone subscribers.

"The slowdown in new subscriber growth and the deceleration in mobile-phone sales translates directly into deteriorating market conditions for wireless carriers," says Jagdish Rebello, director and principal analyst for iSuppli.

With fewer new subscribers, carriers need a mix of strategies, including squeezing more revenue out of their existing customers in developed regions, and going aggressively after customers in emerging markets, suggests iSuppli.

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One way to increase the average revenue per user in the bigger markets could be to offer value-added services such as Internet access, mobile television and music playback capability, all of which command a higher average revenue per user than just basic voice communications.

By 2010, the market for mobile-phone content, including music, video and gaming, will expand to nearly $36 billion, up from $7.7 billion in 2005, says iSuppli.

But finding the right kind of new mobile content services to offer subscribers right away won't be easy.

Ring tones already having peaked, ring-back tones are still on their way to gaining momentum, and mobile TV services are just about debuting worldwide, says iSuppli.

Newer applications such as mobile TV, video and audio streaming, music downloads and interactive gaming also pose another challenge. They require more powerful handsets that will have higher resolution displays, more powerful processing, removable flash cards and local interfaces to connect to PCs, says iSuppli.

Carriers that can marry compelling content and services to affordable yet attractive hardware could win the game, the group says.

Carriers and handset manufacturers also have to turn their attention to areas with lower wireless penetration rates, such as Latin America (48.3% penetration), China (24.4%), Africa, the Middle East and Australia (all at 23.6%) and India (13.5%).

"For India and other developing regions, the next phase of growth will be driven by low-end phones," says Rebello. "And to serve this area, manufacturers need to drive down their phone costs."

iSuppli estimates that low-end phones for these regions need to be priced around $30 to $40 or below.