Over the next five years, a growing range of smart phones is expected to cut into the market for basic mobile handset models.
"We are seeing more smartphones in the market as the price is coming down drastically," said Lindsey McDonald, telecom consultant at Frost and Sullivan. "Nokia is introducing smartphones that are being taken more seriously, its not just about BlackBerry and iPhone. There are a lot of other devices that are capable of handling that functionality. More manufacturers are coming into this market as they realise the growth opportunities in that."
Regionally, a growing population and greater purchasing power are driving the mobile handset industry. Even in countries like the UAE where mobile phone penetration is almost 200 per cent.
"We've been forecasting steady growth in handsets year-on-year on a continued growth in mobile subscriber numbers," although subscriber growth is not meant to be as dramatic as in the past, said Matthew Reed, editor for the Middle East and Africa for Informa Telecoms and Media. "Additionally, the handset replacement cycle will also lend to continued demand."
Supporting smartphones' growth are regional operators, who now appear to be opening up to subsidising handsets to increase their subscriber base.
Nokia leads
"They're subsidising handsets in a way that they really didn't do before … to encourage customer retention, lock customers in. There will be more of that because markets have become more competitive," Reed said.
Price isn't the only factor, however, as analysts expect more regional operators going into subsidizing handsets.
"With handsets, price does become an issue," McDonald said. "When you know you're guaranteed a new handset in two years, the deal does become very attractive. It's also about the service you get with the package and that's where the operators make their margins as well."
According to IDC's third-quarter data, Nokia was the market leader in handsets in the UAE, Saudi Arabia, Kuwait and Egypt. It beat the competition by a significant margin; with Samsung placed second in all markets.
Demand for basic mobile handsets won't vanish.
"Buyers with a lower purchasing power also have options in the lower end market but those devices are increasing in functionality," McDonald said. "They are basic devices, which are also performing functions of a smartphone."
However, the phones could see competition from other areas.
"Another trend we see in the near future is a greater use of mobile applications and perhaps a shift from smartphones to tablets that have higher functionality in that, while still a mobile device," she said. "Depending on local network infrastructure, we will see more vendors to provide that type of device with greater functionality."
