Africa, Asia cushion mobile phones from slowdown

HELSINKI (Reuters) - A continuing mobile phone boom in emerging markets in Asia and Africa mostly offset a drop in demand for expensive models caused by global market turmoil, a survey showed on Monday.

Handset makers sold 283 million phones in January to March, up 10 percent from a year ago, but down around 15 percent from the fourth quarter, which is usually boosted by Christmas holiday sales, according to a Reuters poll.

"On a global basis it should be a good, normal quarter," said JP Morgan analyst Ehud Gelblum.

In the last three years the phone market fell between 9 and 16 percent in the first quarter from the previous quarter, according to Strategy Analytics.

The world's fourth-largest mobile phone vendor, Sony Ericsson (6758.T)(ERICb.ST), whose forte is its strongly branded and relatively expensive Walkman music and Cybershot camera phones, warned on first-quarter profits earlier this month.

That followed a warning by chipmaker Texas Instruments TXN.N of weaker demand for chips for high-end 3G phones, raising fears that the global economic slowdown was starting to crimp the handset industry.

"The volume in the high end of the market could be somewhat thinner, but this will not be dramatically visible in the overall market volume," said Jari Honko, analyst with eQ Bank in Helsinki.

In a Reuters poll, conducted with Inquiry Financial Intelligence, 18 analysts' estimates for first-quarter handset shipments varied from 270 million to 306 million reflecting uncertainties over market growth in Western Europe and China.

Research firm Reuters Insight said it expected first-half sales in China to be flat year-on-year due to soaring food costs, the snow storms that hit the critical Chinese New Year retail period in February, and subdued operator campaigns ahead of an expected sector restructuring by the government.

In Europe, cellphone market growth slowed to 3 percent last year, according to the world's top handset maker, Nokia (NOK1V.HE), and several analysts said Western European consumers could delay upgrading their phones due to economic worries.

"The macroeconomic situation is starting to have impact, but we saw this already before the credit crunch," said CCS Insight analyst Geoff Blaber. "Most of those markets are heavily saturated."

Global market volumes grew 16 percent in 2007, helped by booming emerging markets sales and also the introduction of Apple's (AAPL.O) iPhone, which boosted consumers' appetite for more advanced cellphones in developed markets.

KOREANS, NOKIA TO WIN

Struggling U.S. phone maker Motorola MOT.N, which has now decided to spin off its handset division, is expected to continue losing market share to aggressive competition from Korean vendors LG Electronics (066570.KS) and Samsung Electronics (005930.KS) as well as to Nokia.

"We expect Samsung, LG and Nokia to outperform, while Sony Ericsson and Motorola will underperform," said Neil Mawston, an analyst at Strategy Analytics.

Kim Ik-sang, an analyst at CJ Investment & Securities, said: "I think LG's strategy to prioritize and focus on hit models is working. Samsung is also benefiting from rivals' difficulties but not as much as LG."

Nokia is continuing to benefit from its dominant position on emerging markets and in making cheap models. Motorola, which in 2006 claimed more than 20 percent of the market, saw its share halve last year and is expected to lose further ground as long as uncertainties over the future of its handset business continue.

"The mobile phone industry could see a radical change in the competition landscape due to Motorola's restructuring," Samsung Electronics Chief Executive Yun Jong-yong said at a shareholder meeting last week.

LG Electronics told Reuters it has seen balanced growth in North America, Europe and Asia.

"The uptrend should continue with the introduction of new phones and several hit models, but we are closely watching changes in the market conditions," the company said.

(Reporting by Tarmo Virki in Helsinki; Sinead Carew in New York; Rhee So-eui and Park Ju-min in Seoul)