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Russian market of mobile terminals in the 1Q 2004

Press release, May 7-th 2004

Statistics: Official shipments of mobile terminals suggests 5 107 thousand units in the 1Q 2004, while in the 4Q 2003 they were only 4 053 thousand units. The market growth was 21% what was caused by liquidation of handsets shortage, which was in the 2Q 2003. Grey market suggests 5%, it is a very low index for Russian market, it repeats the results of the previous quarter. The position of the first 5 manufacturers was completely different compared to the end of 2003. The value of shipments (based on FOB prices) was 586 million 655 thousand Euro.

Short description of the market situation. For better understanding of the market situation let us return back to the data of the 4Q 2003. Market shares of the companies in the 4Q 2003 were as displayed below (here and further only sell-in data of companies are used):

The small volume of grey imports did not have considerable influence on the market in general and positions of the manufactures in particular. The main trends of the end of the year were the following: decrease of Siemens’ sales, overstocking of retail chains by Nokia’s products. There were about 320 000 terminals from Nokia in the warehouses on the 1-th of January 2004. About 80% of this amount were phones which cost more than 150 USD. Such high stocks did not allow the company to increase its shipments in the 1Q 2004, there were no sales growth. The stocks were sold mainly during January, in February retailers made minimum orders because they were waiting for decreasing of purchasing prices. The first quarter was unsuccessful for Nokia. The company could reduce stocks but could not remake their structure. Sales of the 1Q showed that low-end phones from Nokia are the most demanded ones. Phones of the middle and high price segments are slowly sold; retail networks purchase only small quantities of these models.

Vice versa, Samsung’s sales in the middle and high price segments were increased in the 1Q 2004. Samsung E700 - the top model of the company had very high sales. Other models, which have already became popular, were shipped in sufficient quantities. Samsung C100 is a typical example of such product. Nevertheless, Samsung also had the problem of a shortage of handsets. It could not satisfy ever-growing demand completely. The situation was the same for all manufacturers except Nokia.

Absence of thought-out strategy for Nokia, which positioned itself as the manufacturer of the premium class, affected its sales. Today phones from Nokia are overpriced by 20%, only after decreasing of wholesales prices the company will become competitive and active sales of products begin. MRG experts doubt that Nokia will take measures, hence, sales of the company will remain the same as in the 1Q 2004. Passivity of the company allowed Samsung to increase its sales and occupy the second place in terms of shipments and the first place in terms of value. Earlier the company was going to achieve these results only in the second half 2004. At the same time Nokia occupied only the third place in terms of shipments and the second place in terms of value. Motorola was only just behind Nokia in value terms, it took the third position.

Siemens no more belongs to the leading group of vendors, it occupies only the 4-th position. MRG experts assumes that unlikely Siemens could increase its sales growth in the second and the third quarters because it has stocks and problems with sales of current product range in retail networks. Even if the company could do it, other manufacturers have a preference, the gap between Siemens and Nokia is 300 000 mobile terminals.

Official shipments of mobile terminals suggests 5 million 107 thousand units in the 1Q 2004. Compared to the previous quarter, market growth was 21%. In spite of shipments growth, a shortage of handsets was remained in February and March on the market. It was caused by shipments delays on the Russian custom. In the end of March the main retailers began to receive goods that were ordered before. This process was similar for all companies, as a result, stocks that exceed current companies needs were formed. Retailers begin to decrease prices to sell the stocks. This process began on the last week of March and continued in the second quarter. It will negatively influence shipments in the 2Q 2004.

Grey imports were amounted to some 5% of total official shipments or 255 thousand mobile terminals; absence of low-end phones in traditional sources of “grey” terminals negatively influenced these shipments. As a result, total grey market became minimum, the same trend took place the second quarter on end.

The Outlook for the 2Q 2004

In the end of the 1Q, beginning the 2Q wholesales channels were overstocked due to the work of the Russian custom. The crisis situation appeared. Slow rate of sales was typical to such companies as Siemens, Nokia, third market players (firstly, Maxon , Pantech , Sagem). Pantech, which entered the Russian market in the end of 2003, filled up its wholesale channels. Unlikely it will increase its sales in the 2Q 2004.

Taking into account that there is no products shortage during a short period of time retail networks prefer to form their range of goods using products of famous manufacturers and it affected sales of the handsets produced by small companies. Sales of Motorola and Samsung will be stable in the 2Q (the same as in the 1Q), Nokia’s shipments could decrease due to overstocking. The situation can change if the company cut down its prices. On the one hand, Siemens has a shortage of handsets, on the other – products of this company are not very demanded. It is resulted in price-cutting and official distributors have to sell the handsets at the price lower than the purchasing one to decrease stocks. Siemens will not be able to increase shipments in the 2Q 2004, the company needs renovation of the model range.

Aggressive price policy of Siemens influences LG, which sells mostly cheap, low-end phones (LG B1300, LG W3000). Products from LG loses to Siemens by both price (LG has higher prices, the difference is 7-11%) and features (absence of color screens). It means that in sales of mobile terminals from LG will decrease in the 2Q 2004, some of its models are not competitive.

Sony Ericsson also has a shortage of products, but its handsets of the middle and high price segments are in great demand. Distributors receives the maximum margin from the phones of Sony Ericsson, the average price of the model in the 1Q was the highest for the products of this company (among large manufactures). It is obvious that there will be no goods in the 2Q 2004, the company need to solve a political problem to increase shipments on the Russian market.

All reasons mentioned above and others facts show that the crisis situation of the 2003 will repeat in 2004. The crisis of 2004 will be caused by other reasons but it will be resulted in the decrease of sales of the manufacturers in the 2Q 2004. According to the forecast of Mobile Research Group market of mobile terminals in the 2Q 2004 will suggest 4 700 units.

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

Published — 07 May 2004

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