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Yankee: Europe on EDGE in 2004

2004 will see the first sales of EDGE-enabled handsets in Western Europe, and there will be more than 9 million users of EDGE devices in the region come 2007, according to Yankee Group. Yankee has composed a table of handset sales projections by technology type that shows EDGE handset sales kicking off in 2004 at more than 600,000 and reaching nearly 7 million in 2007, when there will be more than 9.2 million EDGE subscribers in the region. The projections also have WCDMA handset sales overtaking GPRS in 2007, while also presuming some very low levels of 3G handset sales in 2002 due to the insistence of Hutchison 3G UK Ltd. and H3G in Italy that they would launch before the end of 2002. To date, they are taking advance orders for 3G handsets on their Websites. Here's the Yankee table: Table 1: Western Europe: Total Handsets and Installed Base by Technology, 2002�2007
Total Handset Sales (000s) 2002 2003 2004 2005 2006 2007
Analog
GSM 87,584 62,578 31,262 5,985
HSCSD 147 162 118 54
GPRS 30,473 61,742 86,452 90,432 74,647 56,322
EDGE 638 2,778 5,531 6,846
W-CDMA 36 1,325 11,578 34,171 55,580 74,247
Total 118,240 125,807 130,048 133,420 135,758 137,415
Annual Growth �5% 6% 3% 3% 2% 1%
Source: Yankee Group, 2002 In classifying terminals, the higher technology always takes precedence, for instance a tri-mode GSM/GPRS/W-CDMA handset is considered as W-CDMA. We have also assumed that no reverse migration will occur to older technology (e.g., from EDGE to GPRS). Other key assumptions include continuing handset subsidies, stable economic conditions and the general availability of 3G handsets and coverage by the end of 2004.


While Nokia Corp. (NYSE: NOK) has already clearly stated its intention to deliver EDGE-enabled mobile phones into the European market (see Nokia Promises EDGEy 2003), Yankee senior analyst Farid Yunus reckons there are opportunities for others. "If Alcatel SA can carve out a niche in EDGE handsets, then it may have a future as a handset maker, but I think it has little hope as a mass market vendor." Yunus also believes that Sony Ericsson Mobile Communications would likely produce at least one EDGE handset, "if it is still a going concern," and that the Asian manufacturers could easily enter the market "as they have licensed every IPR [intellectual property right] going, and could quickly enter the market. It's not that difficult to incorporate EDGE into a handset." So why is Yankee confident that EDGE will be a technology used in Europe, when there is no shortage of cynicism surrounding the potential of yet another step in the GSM evolution chain? "Supplier optimism mostly: About two years ago no one thought EDGE would come to anything because WCDMA was going to follow neatly on from GPRS. Now, with WCDMA so delayed and the carriers in no rush to implement it, and with all recently shipped and new GSM base stations having EDGE built in that just requires a software download to turn it on, it's relatively easy to make that upgrade from GPRS to EDGE. It's a matter of whether the handset guys can deliver, and Nokia has said it will." Everything has changed in the past 24 months, adds Yunus. "Two years ago the carriers were not even that enthusiastic about GPRS. Now, with WCDMA so delayed, GPRS has become the network technology that will deliver a lot of the new data services," with EDGE providing the faster speeds when needed until widespread WCDMA is built out. Ultimately, he adds, the mobile carriers will rely on their 3G spectrum for voice and data capacity, especially as the licenses to use the current 2G spectrum run out in about 10 years time, and there is no guarantee that those airwaves will be reissued for the same use. Overall, the Yankee team believes the expanding range of GPRS handsets with color screens and enabling multimedia messaging will help the handset market in western Europe increase by 6.4 percent in 2003 from 2002. The arrival of 3G handsets and the launch of commercial WCDMA networks will help sales momentum so that each year will see an increase in overall volume sales, albeit down to as little as 1 percent year-on-year in 2007. As the market saturates, only 3 percent of sales will be first-time buyers in 2007, believe the Yankee analysts. Continued subsidization of handsets by the carriers will be necessary for mass market takeup of new devices, with 3G handsets needing higher levels of subsidies in the initial launch years, says Yunus. However, the operators must be careful to "sell a lifestyle, not a phone." — Ray Le Maistre, European Editor, Unstrung
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