Multipurpose Cellphones Keep Replacement Cycle Spinning

By Joseph Palenchar On Dec 20 2004 - 8:00am

Cellular carriers and handset makers will go to CES with more reasons for consumers to replace their phones and drive up handset sell-through.

Strong new-subscriber growth and a strong replacement market helped drive up U.S. cellular-handset sell-through by 12 percent to 17 percent in units and by mid-single digits in dollars in 2004, according to a variety of suppliers and analysts. They expect similar results in 2005.

New phones sporting color screens, megapixel cameras, downloadable applications, PDA functionality and the ability to stream video content will help continue the momentum, suppliers said. At CES, therefore, select suppliers plan to unveil new PDA phones, camera phones, and phones that store MP3 music. The introductions point to a day in the next decade when handsets will become all-purpose multimedia devices, replacing MP3 portables or PDAs for many consumers, some suppliers contend.

Carriers will do their part to stimulate replacement sales by offering new services, including video-on-demand, enabled through their spreading high-speed data networks. Sprint PCS, for example, announced that it will add high-speed CDMA 1x EV-DO service to major markets in 2005. And Cingular recently announced plans to deploy UMTS 3G technology in the top 100 markets by the end of 2006 to initially deliver average data speeds of 400Kbps to 700Kbps, with bursts to several megabits per second. That will leap past rival EV-DO technology, which delivers 300kbp to 500kbp throughputs with bursts up to 2.4Mbps in the Verizon network.

Continued new subscriber growth will also lift handset sales in 2005, suppliers said, although 74 percent of Americans already use a cellphone, according to the NPD Group. Thanks largely to MVNOs (mobile virtual network operators), carriers are reaching previously underserved market segments, from youths to Hispanics, through nontraditional distribution channels, marketers told TWICE.

Some of these first-time subscribers, particularly in the youth market, may be as interested in cellphones' non-voice capabilities as replacement buyers might be. For these potential customers, handset makers at CES will unveil more phones equipped with high-speed EDGE and EV-DO data technologies, MP3 playback, PDA functionality, QWERTY keyboards for messaging and, of course, cameras with a whole mess of megapixels.

Two companies, including NEC, will show their first EDGE phone for the U.S. market, and another will show its first EV-DO phone. A third company will show its first Pocket PC phone, a QWERTY-keyboard-equipped quad-band GSM model that will also support GPRS/WLAN data and voice applications. It will feature 1.3-megapixel camera.

For its part, NEC will display the recently announced NEC 232E "fitness phone," which is also the company's first EDGE phone. The midtier handset, targeted to time-pressed women, enables users to download fitness-related content, including content from Fitness magazine, as well as search, save and e-mail tips and articles and access recipes, personalized workout and diet programs, animated workouts, target heart-rate and calories-burned calculators, and the like.

The service will also offer workout instructions and meal plans.

The 232E fitness phone has an integrated VGA-camera, enhanced Java™ applications, a 65,536-color display and outstanding levels of sound quality with a 40-note polyphonic ringer.

The phone is available for use in the AT&T Wireless Network, and can be purchased online at www.NECHDM. com, www.fitnessmagazine.com and www.telescope.tv for $249.