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Cellular Sails Into Record Books: TIA

Arlington, Va. — Factory-level sales of cellular handsets rose last year by 23.5 percent in units to 104.5 million, and by 25.4 percent in dollars to $14 billion, and sales will grow almost as rapidly in 2006 because of growing cellular penetration and high levels of replacement sales, a Telecommunications Industry Association (TIA) study found.

The TIA’s 2006 Telecommunications Market Review and Forecast also stated the number of net new wireless-phone subscribers hit an all-time high in 2005 of 25 million and that 2006’s projected net subscriber additions of 23.5 million will be the second highest on record.

With record net new subscriber growth, the subscriber base hit 194.5 million at the end of 2005, more than double the installed base of only five years ago, TIA found. By the end of 2006, the subscriber base is projected to hit 218 million on its ways to 270 million in 2009.

Record growth in the number of net new cellular subscribers helped accelerate handset unit and dollar growth in 2005 past 2004’s unit and dollar growth of 20 percent and 21.8 percent, respectively, TIA continued. In 2006, the report forecasts a slight decline from the previous two year’s growth level, to 19.2 percent in units and 21 percent in dollars.

For the 2007-2009 period, the percentage growth rates will slow some more until they reach the single digits, TIA forecasts. As a result, the compound annual growth rate in sales from 2006 to 2009 will slide to 12.6 percent in units and 14 percent in dollars.

Handset sales growth will moderate, TIA said, in large part because “there are limits to its [the industry’s] subscriber-growth potential, as nearly two-thirds of the U.S. population has already subscribed to a wireless service.” In 2005, wireless penetration hit 65.8 percent of the U.S. population and will reach 73 percent in 2006 on its way to a projected 88.1 percent in 2009, TIA said.

As a result, during the remainder of the decade, percentage growth in the number of net-new subscribers will slide from its four-year high of 14.7 percent in 2005 to 12.1 percent in 2006 and into the single digits during the subsequent three years. As a result, the 2006-2009 compound annual growth rate will slump to 8.5 percent. By 2009, the annual number of net new adds will fall to 15 million from 2005’s 25 million.

Growth in handset unit and dollar sales will follow in tandem, TIA said, rising in 2007 by 14 percent in units and 15.7 percent in dollars, by 9.1 percent in units and 10.7 percent in dollars in 2008, and by 8.4 percent in units and 9.2 percent in dollars in 2009. In percentages, however, hardware growth will nonetheless exceed net new subscriber growth during those years because of “high levels of replacement sales, spurred by the introduction of new features,” TIA said.

The association also found that the average factory-level price of handsets rebounded in 2004 after six years of decline, enabling dollar sales to slightly outpace unit sales growth that year and in 2005. TIA expects similar low-single-digit pricing gains to continue through 2009, enabling dollar percentage growth to outpace unit percentage growth during that time. “Dealer prices for handsets turned around in 2004 and will continue to edge up as new features increase costs,” TIA projected.