Cell phone demand to stay strong despite downturn: U.N.

GENEVA (Reuters) - Mobile telephones are seen as “a basic necessity” around the world and should enjoy persistent strong demand throughout an economic downturn, a United Nations agency said in a report published on Monday.

A man takes a picture using the Sony Ericsson C903 Cyber-shot mobile phone during the Mobile World Congress in Barcelona in this February 15, 2009 file photo. REUTERS/Gustau Nacarino

“With or without a recession,” millions of people in India, China, Nigeria, and other emerging markets will seek out mobile phones, according to the International Telecommunication Union (ITU).

Increasingly cost-conscious households in Europe and North America are also expected to keep up their mobile use, and many will drop their fixed-line telephones as a way to save money, the ITU said in a report released for the Mobile World Congress trade show in Barcelona.

“Once a user gets a mobile phone, it is difficult to give up, and in many countries mobile phones have become a necessity,” its Confronting the Crisis report found.

“Many communication technologies including mobile telephony and broadband still offer huge growth potential, with or without a recession,” it said. “With its strong growth potential, mobile telephony can help facilitate economic recovery.”

There were 4 billion mobile subscriptions worldwide at the end of 2008, after an average of 24 percent annual growth since 2000. Saturation rates are above 100 percent in Singapore and Hong Kong, compared with 30 percent in Nigeria and just over a quarter in India, two of the fastest expanding mobile markets.

The ITU said people in developing countries are increasingly reliant on telephones for voice and information services, such as farmers and fishermen who get text messaging for information about commodity prices and the weather.

The popularity of mobiles in developing markets such as China, Pakistan, Malaysia, Thailand and Bangladesh could create an opportunity for a technology “leapfrog” where Internet services could be provided to consumers without computers.

Companies that have invested heavily in emerging markets include India’s Bharti Airtel Norway’s Telenor, South Africa’s MTN, Egypt’s Orascom Telecom, Kuwait’s Zain and Vodafone’s Vodacom.

Afghanistan, where landline cover is almost non-existent after three decades of war, has drawn a subsidiary of Cable & Wireless, Swedish-Finnish TeliaSonera, and the United Arab Emirates’ Etisalat.


In richer markets, such as western Europe and North America, the ITU said mobile operators may better placed than fixed-line telephone providers because the investments required to maintain cellular networks can be less onerous.

Many developed-world customers are likely to favor their mobiles to home lines as a result of a downturn, but may be more careful about their spending and delay purchases of handsets, its report said, signaling trouble for telecom equipment and gear makers such as China’s Huawei and ZTE, Ericsson, Nokia.

Pre-paid and flat-rate packages could also become more popular, according to the Geneva-based ITU.

“There is some evidence that consumers are already postponing plans to upgrade their mobile phone and have become more cost-conscious when making calls,” it said.

“Operators will find it harder to promote value-added services to wary consumers and the adoption of new services (such as mobile TV) will certainly be impacted.”

Tight credit could cause telecom operators to reduce their investments, and encourage industry consolidation, the report said, noting cost-saving outsourcing may also grow.

The ITU encouraged governments to include investments in telecoms in economic stimulus packages now being developed.

“Investing in high-quality, affordable information infrastructure, education and knowledge may be the best way to innovate out of this crisis, especially for developing countries ... Investing in broader access to knowledge becomes even more important during times of crisis, rather than less so.”

Editing by Erica Billingham