Russian market of mobile terminals in the 3Q 2003

Press release, October 16th, 2003

Statistics: Official sales of terminals on the Russian market suggests 4 529 000 units in the 3Q, and in the 2Q 2 505 000 units. Market growth is 55.5%.

Short description of the market situation. Market growth in the third quarter was obvious. Trends were set in the last months of the second quarter, but the growth rate was really unexpected. According to several estimations the market should have grown by 20 - 30 %, but in reality the rate was higher. Reasons of this rapid growth are the following: larger demand for the phones in retail chains, record level of sales, regional players activity and lesser “grey” market volume.

Low-end models were the phones of priority demand. They were in short supply for all market players. Shortage of Nokia 3310 and irregularity by two-week shipments became two of the main factors that affected the company’s position. All distributors refused to purchase large quantities of this model because they were waiting for the prices to drop. As a result, shipments to the Russian market became less frequent in the 3Q. These events made it impossible for Nokia to obtain first place regarding shipments of terminals, and has also helped Motorola in maintaining its leading role for two quarters in a row. The market shares of the third quarter are as displayed below.

Shipments of mobile terminals into Russia from mobile phone companies are as follows.

Two models are mainly responsible for Motorola’s optimistic sales figures – the low-end handset Motorola T190 and the cheapest handset with a color screen – Motorola C350. Together the models generated up to 90% of the company’s sales structure, which is very typical for the 3Q. It proves in fact the existance of a demand for cheaper phones on the market, and preferrably at a price range up to 150-200 USD.

In total, so far this year the demand has been moving to higher price segments, but reaches a maximum in the 150-300 USD price range, though the second maximum remains in the low-end price segment.

The introduction of Philips products on the market could also prove evidence of the determinant low-end segment in the 3Q. The company shipped “only” 30 000 terminals in the 2Q and already 119 000 – in the 3Q. It allows the company to occupy the 8th place on the market and as such, they surpass Panasonic. Growth of sales was caused - not by changes in the corporate structure or launching new models - but adapting to the actual demand structure. There was a demand of cheap phones on the market, and this demand was addressed by releasing handsets from Philips.

The last example is the increasing sales of Sony Ericsson products, which could offer one of its low-end solutions – the Sony Ericsson T100 - at a reasonable price. This handset was mainly one of the products in the company’s low-end portfolio, allowing Sony Ericsson to strengthen its market share in a rapidly growing market.

Siemens couldn’t improve its positions though launching several active advertising campaigns. The absence of new products and shortage of available handsets are partial reasons. Official distributors orders were supplied only up to 30-40% (it concerned the most demanded low-end products). The similar situation will remain in the 4Q which will allow the competition to increase its shipments.

Market shares of the companies for the first three quarters 2003 are as displayed below.

During nine months in 2003 about 10 878 800 terminals were shipped (including the "grey" market). Due to low volume of the “grey” market in the 3Q, data for the whole year has changed. Totally, “grey” market is currently estimated to 13%.

Pending the results of the 4Q, which company has the largest market share is yet to see. Motorola has the smallest gap to Nokia, which both are the strongest players in Russia. Dynamics of Motorola’s growth showed that it could in fact inherit the largest national presence from Nokia in the end of the year.

Samsung continues to show sales growth, but its position on the market will not change significantly in the end of the year, although it probably will after the first six months of 2004. If so, it could run down Siemens from third place (if taken into account total sales, consisting of both official and grey market shipments).

The main events of the 3Q

• Market growth was increased by 55.5% in the 3Q. (Regarding official shipments)
• Manufacturers shipped 4.529 000 terminals to Russia
• Total market growth, including “grey” market volume, is 64.4% compared to the 2Q.
• “Grey” market of the 3Q was the smallest in the 3Q and consists only of 6.4% of total shipments.
• “Grey” market is the largest for Siemens in the 3Q which is 25%. Other brands have a less than 5% presence.
• The growing demand of low-end phones caused market growth; shipments in this category were the largest and manufacturers couldn’t supply enough to meet the demand.
• The replacement market has become more significant in the larger cities.

Outlooks of the forth quarter

• Motorola has a chance of becoming the no.1 company in the nation regarding shipments of terminals and to get the largest market share.
• Goods remainders of Nokia were increased - it’s possible that a crisis like in the 2Q could repeat itself in the 4Q.
• Price reductions for Siemens phones in the 4Q is not expected, as necessary amounts of shipments could not be provided
• Samsung should continue to increase sales of mobile terminals and play an active role in the 150-250 USD price range.
• The sales growth in the 4Q should increase about 7% compared to the 3Q.
• Total market volume of mobile terminals in Russia would be more than 14 million.

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, 2003

Eldar Murtazin (eldar@mobile-review.com)
Translated by Maria Sennikova (maria@mobile-review.com)
Text editor: Tommy Kellerman (Tommy.Kellerman@kama.se)

Published — 21 October 2003

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