Wireless Phone Ads Proliferate As Advertised Prices Fall
By TWICE Staff -- TWICE, 12/20/1999
The volume of wireless phone advertising soared this year in newspapers and catalogs, and phones from three brands -- Ericsson, Motorola and Nokia -- accounted for more than two-thirds of the phones advertised, according to a survey by Beyen International Market Research.
In surveying ads in about 90 newspapers and catalogs, Beyen found that the frequency with which individual phones appeared in ads during the first three quarters of 1999 exceeded the advertising frequency for all four quarters of 1998.
Beyen also determined that the average advertised price of wireless phones fell almost 45 percent to $44 during the third quarter of 1999, compared to the year-ago quarter.
The price reductions occurred in all technologies: analog, iDEN, CDMA, GSM and TDMA.
The average advertised prices of CDMA phones, however, fell the least, increasing the price premium in percentage and dollar terms between CDMA and the other digital technologies.
The disparity widened despite what analysts and marketers describe as increasingly aggressive phone buy-downs by CDMA carriers -- as well as growing production volumes that enabled CDMA phones to outsell other digital technologies for the first time in the first and second quarters of this year.
The survey also determined that the total number of phones advertised during the first three quarters of 1999 (61,284) exceeded full-year 1998 advertising frequency (50,975) by 20 percent.
Also during those two time periods, the advertised number of phones from Ericsson, Motorola and Nokia grew by 20 percent to 44,213, with the three brands accounting for 72 percent of all advertised phones in the first three quarters of this year, compared to 71 percent during all of 1998.
The survey also determined that among the three most advertised brands, TDMA phones were the most heavily advertised in the first three quarters of this year, followed by analog phones, in a reversal from the year-ago period. Advertising of each digital technology was up, but analog advertising was down.
In its survey, Beyen includes free phones but enters them in its statistics as one-cent phones.
Here are the details of Beyen's findings:
Advertised prices: From the first quarter of 1998 through the third quarter of 1999 prices of iDEN phones fell the most in percentage terms, followed by GSM. CDMA prices fell the least in percentage terms.
For example, comparing the third quarters of 1999 and 1998, Beyen found that the average price of an iDEN phone fell 62 percent to $65.51, GSM prices fell an average 58 percent to $53.56, and TDMA prices fell 48 percent to an average $36.11.
Also during that time analog models fell 30 percent to an average $25.02, single-mode CDMA phones fell only 11 percent in average price to $87.35, and dual- and trimode CDMA models fell only 4.5 percent to $82.92.
Not only has the CDMA price premium grown relative to all other technologies, but rapid iDEN price reductions turned CDMA technology into the industry's most expensive digital technology in the second and third quarters of this year. iDEN technology held that distinction during the previous four quarters.
iDEN's price reductions likely reflect increased price aggressiveness by Nextel, the country's biggest iDEN carrier, as well as economies of scale resulting from growing volumes that in turn are caused, in part, by growing retail distribution.
TDMA's price reductions have also been driven in part by economies of scale, mainly on the strength of AT&T Wireless's Digital One Rate plan, which is linked to the use of TDMA trimode phones.
GSM's price reductions are driven in part by some GSM carriers having inaugurated optional service contracts that, if taken, entitle a new subscriber to lower phone prices, one marketer said.
In comparing average prices of dual- and trimode TDMA phones to dual- and trimode CDMA phones, Beyen found the 26 percent ($18.08) premium on CDMA versions in the third quarter of 1998 grew to a 130 percent ($46.81) difference during the third quarter of this year.
Brand share: Phones from the big three brands continued to account for the vast majority of phones advertised: 72 percent in the first three quarters of 1999, compared to 71 percent during all of 1998. For the second consecutive year Nokia phones were the most advertised phones, surpassing Motorola phones, which held that distinction in 1997 and in previous years, Beyen said.
Retailers and carriers advertised Motorola less often during this time because the company's availability of digital phones didn't come close to matching the availability of Nokia's digital models.
In recent months, however, Motorola's digital selection has grown, pointing to potential growth in advertising of Motorola phones.
Technology share: In comparing the frequency of advertising by technology, Beyen found that among the top three advertised brands TDMA phones were advertised most often (21,111 times) during the first three quarters of this year. Next in frequency were analog (11,496), GSM (6,173), all flavors of CDMA (5,433) and iDEN (4,575).
During calendar-year 1998 analog was advertised the most (15,636), followed by TDMA (14,162), CDMA (3,641), GSM (3,260) and iDEN (361).
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