TIA

For Immediate Release
April 7 , 2006

New features such as more advanced cameras and MP3 players to spur wireless handset replacement market

Arlington, Va. -- As prices have fallen and services have improved, the number of wireless subscribers has skyrocketed from 38.2 million in 1996 to 194.5 million in 2005; the total number of wireless subscribers is expected to reach 218 million in 2006 and grow to 270 million by 2009, according to TIA's 2006 Telecommunications Market Review and Forecast.

The wireless industry has changed dramatically from the first generation of analog phones introduced in the early 1980s. The industry migrated to digital phones in the 1990s and is now adopting third- generation (3G) technology to make the cell phone much more than a means of conversation. Modern cell phones include features allowing the user to access the Internet, download music and ring tones, play video games, watch TV, take digital photos and more, making mobile phones all-inclusive and indispensable communications devices.

Currently, short message service, or text messaging, is the world’s most popular wireless data application. Ring tones, songs that can be downloaded to mobile phones, and multimedia messaging services are other popular wireless data applications. Personal digital assistants (PDAs), including PalmPilot and BlackBerry™ among others, gained popularity through 2001. Sales of traditional personal digital assistants (PDAs) in the United States have since declined, as consumers have migrated to new smart phones with typical PDA functionality such as calendars and address books in addition to their primary phone capabilities, which eliminates the need to carry two devices.

The wireless industry is seeing consolidation by the regional carriers. However, ample competition remains. According to the FCC, 97 percent of the U.S. population lives in counties served by at least three mobile operators, an increase from 88 percent in 2000. Carriers are constantly developing new pricing strategies and have introduced plans offering large numbers of minutes for a fixed price and discounts during nonpeak hours as a way to stay a step ahead of the competition. Average monthly spending is expected to continue to increase with the introduction of new services and more expensive plans that include more minutes. Average spending per subscriber will increase to $55.25 per month by 2009, growing at a compound annual growth rate (CAGR) of 2.4 percent. By contrast, average spending decreased each year in the 1990s. Growth in the number of new subscribers will slow in the next few years, because nearly two-thirds of the population already has a wireless phone. The number of subscribers is projected to reach 270 million by 2009, up from 194.5 million in 2005, increasing at a CAGR of 8.5 percent.

As the growth of new subscribers slows, manufacturers are introducing new handsets with additional features, such as more advanced cameras and MP3 players, to spur the replacement market. New wireless handsets are being marketed as portable entertainment centers with voice communications as a sideline -- these devices will help drive replacement handset sales. Handset unit sales in the United States jumped 23.5 percent in 2005 to 104.5 million and are expected to reach 124.6 million in 2006 and 168.0 million in 2009. Handset spending will rise to a projected $23.7 billion in 2009, growing at a 14 percent CAGR.

One of the factors propelling wireless growth has been the emergence of prepaid wireless plans. Between 2002 and 2005, the number of prepaid wireless subscribers more than doubled to 28.9 million, comprising nearly 15 percent of all wireless subscribers. TIA predicts there will be 34.7 million prepaid wireless subscribers in 2006 and 41.3 million subscribers in 2009, growing at a 9.3 percent CAGR. Revenue in this area is projected to be 22.3 percent on a CAGR, increasing to $22.2 billion in 2009 from $13.8 billion in 2006.

TIA's 2006 Telecommunications Market Review and Forecast provides an overview of telecom's interrelated market segments including landline network, enterprise and consumer, wireless communications, and international markets. It's available in hard copy or on CD-ROM. To order, please visit http://www.tiaonline.org/business/research/mrf/ or call +1 (703) 907-7074. Note to media: To obtain a press copy of the report, please contact Jennifer Mead at +1 (703) 907-7723 or email jmead@tiaonline.org.

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TIA is the leading trade association for the information and communications technology (ICT) industry. As owner and producer of GLOBALCOMM, TIA represents global ICT suppliers and their service provider and enterprise customers through its leadership in standards development, domestic and international policy advocacy, and facilitating member business opportunities. TIA represents the communications sector of the Electronic Industries Alliance (EIA). Visit us at http://www.tiaonline.org.

P.A. Release: 06-33/04.07.06