Russian market of mobile terminals in the 2Q 2004

Press release, July 22 2004

Statistics. Official shipments of GSM-terminals on the Russian market suggested 4 949 thousand terminals (heere and after the sell-in figures of the companies are used, not retail sales), while in the first quarter officials shipments suggested 5 107 thousand terminals. The decrease of sales was 3 percent, which happened due to the April glutting after the stabilization of the customhouse work. The grey market shipments suggested 4 percent, which is very low of for the Russian market, it may be compared to the results of the previous quarter (5 percent). The sales scale changed for the main five manufacturers as well as their positioning on the market. The value of shipments suggested 523 million 572 thousand Euros.

Sony Ericsson took the fifth place for the supplies of unit shipments having overridden LG. The average price for Nokia became less than 100 Euros. The decrease of average price was typical for all the manufacturers with Samsung and Alcatel being exceptions.

The forecast of the market for 2004 remained the same; official shipments of GSM-terminals will suggest 21.5-22.5 million terminals.

Short description of the market situation. At the beginning of the year, the situation was promising on the Russian terminals market. Although the market growth was detected, the growth dynamics were slowed down by such inconveniences as the shipments detention in the customhouse. The situation in the first quarter is to be reviewed below along with its development.

Official shipments of terminals suggested 5 million 107 thousand in the first quarter. As compared to the previous quarter, the increase of sales is 21 percent. However, the shortfall of equipment that happened due to the shipments detention in the customhouse was still a problem in March and February. Only at the end of March, distributors started obtaining the cargos ordered previously. This process was synchronized for all the companies and as a result, the problem of stocks bigger, than the current companies’ needs, had to be faced. The game of these stocks realization and price decrease had to be began. The game of the price decrease started in the last week of March and lasted during the second quarter.

Market shares in the 2Q 2004

This process has negatively influenced the off-loading in the second quarter (mainly in April and March) and some of the companies did not manage to increase its shipments (Siemens, Nokia). This situation encouraged the market share decrease of the LG Company that had moved to the sixth place giving way to Sony Ericsson.

Shipments of the mobile terminals by model in the second quarter 2004 were the following:

The first four leading manufacturers remained the same; the overall shipments decreased for every one of them. At the same time, the gap between Samsung and Motorola diminished. This happened due to the rejection at the beginning of the second quarter of already place orders for Motorola phones by some of the distributors. On the other hand, there were no such problems for the Samsung Company. Although having rejected two low-end models (Samsung R210, N500) that made a big share of overall sales, the company managed to compensate their absence with the new models of the middle segment having increased their supplies. The company has stabilized its position at the time of lower market volume. Now it is the most favorable company of all the distributors since the realization of Samsung phones is outstanding and the margin is high.

As compared to the first quarter, the decrease of the market volume diminished by three percent, which happened due to the low April sales and the overstocking of the distribution channels.

The decrease of the average price as compared to the first quarter is to be overlooked below. Such comparison may help to perceive the situation and characterize it fully.

The decrease of the average selling price had a positive impact on the Sony Ericsson production only; the company managed to increase its market share mainly due to the shipments of inexpensive models (T100, T105, and T230). At the same time, the supplies of the models of high and middle price segments were preserved on the superior level. Models such as T610, T630, and P900 were still in deficit.

The reduction of the average price was 19 percent for Nokia, which is a very high indicator that stands for the demand of the inexpensive models solemnly. Now, Nokia 3310 ranks for the highest sales although it is fairly out of fashion. Among the models of the high price segments, Nokia 6230 is the only one to be in a big demand. However, the company did not manage to provide the shipments of this phone in the sufficient amount. Several new products (Nokia 661I, N-Gage QD) were taken rather coolly and their supplies were minimal. The company is on the edge now - if there is to be no price default by 15-20 percent, the company will start loosing its market share. Currently, Nokia does not have a formed product range and models capable of competing with other manufacturers when the price is concerned. In the view of MRG, Nokia becomes associated with the low-end phones, which certainly sheds a shadow on the name of the brand. If the company does not change its strategy, it will end up loosing from two to four percent of the market share during the third and the fourth quarters.

Grey imports suggested 203000 terminals or four percent of the total official shipments. As compared to the first quarter, the decrease of the grey market shipments was one percent. Presently, there are no grounds for the grey market growth.

The turbulences in the Communications Ministry in the second quarter had a negative influence on the market of the mobile phones. Due to the lack of the commission responsible for the licenses of the new models, the manufacturers did not manage to certify the new models that were supposed to enter the Russian market at the end of the second and beginning of the third quarters. Consequently, the companies had to overlook their plans of equipment supplies to the Russian market and some of the manufacturers started the shipments and the models’ advertising without certificates (that is the violation of the Russian legislation). The situation had mostly influenced Sharp Company that postponed its entrance on the Russian market originally planned for the end of May-beginning of June. The impact on other manufacturers was not that strong, although it was still significant (view the MRG press-release №3, 4 for June).

Forecast for the 3Q 2004

The mobile phones certification will influence negatively the market of the mobile terminals in the third quarter. The seasonal troubles with the Russian customhouse (just like in the last year) are to be expected. Thus, the market potential will not be realized to its fullest. Consequently, there will not be any radical sales increase. The rather pessimistic forecast of Mobile Research Group suggests 5 million 200 thousand terminals for the market.

About Mobile Research Group

The main activity of Mobile Research Group (http://www.mobile-analytics.ru) - is mobile terminals market researches in Russia. The company analyses the competitive situation of all mobile phones manufacturers available on the Russian market, and researches retail and wholesales of mobile terminals. Basing on analyzed statistic data the company makes a forecast of the mobile terminals market development for some period (up to one year). According to concluded partnership agreement once a quarter the company presents a market analysis report, where the most considerable events and their results are marked.

Publishing data contained in this press release without a link to the Mobile Research Group as a source of information is prohibited. We reserve the right to change data published above if any new circumstances or new information earlier unknown to us arise.
© Mobile Research Group, 2004

Eldar Murtazin ([email protected])
Translated by Maria Kapustina ([email protected])

Published — 03 August 2004

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