Global average retail prices for 70% of mobile phones to fall under USD 100 by 2015

Gurgaon (India), March 2011: Evalueserve estimates that the global Average Selling Price (ASP) forapproximately 70% (4.8 billion) of active mobile phones will fall under USD 100 by 2015. This can beattributed to the increased focus of manufacturers on lower-middle income countries such as Chinaand India that are cost-sensitive, but volume heavy. Increased competition among manufacturers overthe past decade has also encouraged this trend.

Evalueserve estimates the global handset demand to rise to approximately 2.58 billion in 2015, withthe replacement market accounting for approximately 94% of the gross demand. ’This change inbuying behaviour will be driven by two factors: rapid commoditisation of the mobile handset withprogressively reducing price points, and higher tendency to switch handsets, particularly in the massmarketsegment due to the low switching cost’, said Nitin Navish Gupta, Assistant Vice President,Telecom and Media Practice, Evalueserve.

The dominant replacement market and lower ASP of mobile phones will drive handset manufacturersto improvise and innovate to stay competitive. According to an Evalueserve analysis, Nokia, thelargest mobile manufacturer, recorded an approximately 39% fall in its ASP between 2005 and 2009.Similarly, Samsung’s ASP for mobile phones declined approximately 33% over the same period.

With the declining subscriber additions, the demand for replacement handsets is expected to becomethe key driver for the mobile market. Evalueserve estimates the share of handset replacementdemand to the overall handset demand to increase from 73% (1.46 billion) in 2010 to 94% (2.43billion) in 2015. Over the same period, gross handset demand is expected to increase at a CAGR of5.1% from 2.0 billion in 2010 to 2.58 billion by 2015.’

Manufacturers are likely to churn out handset models faster than before, which will mean they willneed to experiment more. Among other factors, the purchase will also depend on how seamlesslypeople can connect with the social networks and stream content. Also, manufacturers will need tocome up with innovative business models to reduce customer acquisition cost and increaseconsumers’ loyalty to their product and service’, said Gupta.