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Eldar Murtazin (eldar@mobile-review.com)
Translated by Maria Sennikova(maria@mobile-review.com)

Published — 09 April 2003

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Rambler's Top100

Mobile phone market in Russia, 1 quarter 2003

There are not many changers in leading positions of the companies compared to 4-th quarter 2002. The struggle was for sales, not for market positions. The end of the year was rather successful, what allowed to make optimistic forecasts for 2003. Basing on preliminary estimations of market volume 2002, many companies made their plans for 2003. Nokia was the leader here. It is known that the aim of the company is to achieve 40% market share both in Europe and in Russia. But on the contrast to Europe, share of the company has been hesitated between 25-26%. It was very difficult to increase it. Nevertheless, according to rumors, the company planned to sell more than 4 million of mobile terminals during 2003. These rumors influenced the market and estimations of potential market of 2003 were shifted to 11-12, and even 14 million of mobile phones. We can remind you that whole market volume of 2002, including grey market share was about 8 million of terminals. This estimation is considered to be universally recognized, although there are publications, which indicate such figures as 13-14 million of terminals.

New estimations of the market forced some companies to overestimate their capabilities, unreal figures, which were not comparable with sales statistics 2002, appeared in the companies reports. If we just sum up all forecasts of different companies, we can find out that some companies should just leave the market, because, otherwise, market volume is estimated as 17 million of phones. It is much more than even the most optimistic forecasts. Its interesting that besides Nokia, only second players were so sanguine about it. Forecasts of Motorola and Samsung were more weighted. Siemens also partly supported the race and made errors in the forecasts. Results of the 1. quarter were very disappointing for several companies, some of them had to revise their plans. For example, Nokia reduced presumable sales plan for its main 4 distributors. Lets view the figures of official mobile phones supplies.

  1. Nokia 680
  2. Siemens 540
  3. Motorola 375
  4. Samsung 375
  5. Sony Ericsson 270
  6. LG 180
  7. Alcatel 150
  8. Panasonic 50
  9. Philips 30

Total market volume 2 mln 650 thousand

The main interesting situation has Samsung and Motorola. At first sight you could think that Korean manufacturer soon will overtakes Motorola. But its not so, because we didnt take into account grey market share of the companies. If Samsung has only up to 5% of grey market share, Motorolas share is much higher. In 2002 Motorola occupied the first place on the grey market. The grey share of certain models reaches 80-85%. Average grey market share of Motorola was about 65%. In the beginning of the year the company tried to do all the bests to reduce grey market share. In particular, Motorola C350 was unveiled in Russia, and it was the first country where it the sales started, what exclude the possibility to ship this model from the other countries at first time. Nevertheless, according to our estimations, about 120 000 of phones manufactured by Motorola were shipped to out country in one or another way.

It doesnt mean that Motorola overtakes Siemens. The latter company also has such problem as a grey market. For example, in 1. quarter absence of certified S55 had a negative influence on the company. As a result, grey market volume grew to 60 000 mobile phones.

  1. Motorola 120
  2. Siemens 60
  3. Sony Ericsson 40
  4. Nokia 30
  5. Samsung - 19
  6. Panasonic 5
  7. Philips 1.5

The companies positions wont changed if we take into account the volume of the grey market, but the shares will be different.

  1. Nokia 710
  2. Siemens 600
  3. Motorola 495
  4. Samsung 394
  5. Sony Ericsson 310
  6. LG 180
  7. Alcatel 150
  8. Panasonic 55
  9. Philips 31.5

Total volume of the market 2 mln. 895 thousands

But lets turn to manufacturers and supplies. Nokias error was rather large and influenced other market players. Most of distributors work with several vendors; domination of one brand in portfolio affects others.

So, Nokia tied distributors hands, they had no choice, though retail sales were not repaid. As usual in the beginning of the year all credits have been already received, distributors have a cash flow crises. They couldnt make new purchases. It is necessary to take into account time, during which large distributors can support retail sales of one or another model without new supplies. Nokia is kept during 4-5 weeks, Siemens and two other players 3 weeks. Samsung and LG have an advantage, although they also suffer from distributors cash flow crisis. Motorola has a unique chance; its distributors (which are at the same time are the distributors of the other manufactures, except Euroset) have a reserve for about 1 week. It allows to presume that firstly distributors will buy phones from Motorola and the company wont have supplies delays.

Overstocking of wholesale distribution channels will cause reducing of wholesale purchases in the 2. quarter 2003 and as a result reducing of manufacturers sales. A unique situation is formed on the market: growth of grey market is stimulated by official channels overstocking. There is a large time gap if to say about new models shipping. Besides, price policy is not always the same as in Europe.

According to our estimations, in the 2. quarter distributors will reduce accumulated stock of models made by certain companies. Nokia has the crucial situation, now distributors keep Nokias phones to wide models range. They cant earn money, selling Nokias phones today. For example, the price of Nokia 3310 is less than purchasing price, but distributors sell it to get read of this model. This situation affects also retail sales. We dont expect high demand for mobile phones till May.

So, in general, error of Nokia affects the whole mobile phones market. In the second quarter, even taking into account growth of the whole market, sales of mobile phones wont increase; they will remain most likely on the same level or probably go down by 20%. It means that in the second quarter all manufacturers will be able to supply officially about 2 million 120 thousand of mobile terminals. So, its doubtful whether whole market volume will be 13 million this year, it seems to us that its better to consider it as 11-12 million. The second quarter and the beginning one the third one will be the main important. Sales on the whole year will depend namely on that results.

Todays market situation means that in the near time end mobile phones users can expect slight reducing of prices for Nokias phones. Most likely manufacturers will increase its advertising budgets to promote their phones.

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