Wireless Voice Has Growth Potential in U.S. Markets

Wireless voice penetration in the top U.S. markets ranges from 36 to 48 percent, according to a study by Telephia, Inc., meaning not only does an opportunity still exist for wireless voice providers, but the wireless data market also has plenty of room for growth.

The significantly different penetration rates between markets, which exist despite many national carriers and pricing plans, are likely the result of regional or market-based factors such as the intensity of carrier competition, advertising spending patterns and the effectiveness of marketing activities, Telephia found.

The study also suggests that if analyst predictions that U. S. penetration rates will eventually reach levels seen in Europe hold true, there appear to remain significant growth opportunities for the domestic wireless voice industry.

New York and Los Angeles, the two largest markets based on population, both rank among the bottom three — and below the average of the top 10 — with regard to wireless penetration, with rates of 38 percent and 36 percent, respectively. Washington, D.C., and Boston register the highest penetration rates. The number of wireless subscribers in both markets approaches half of the total market population. Nationwide, Telephia puts the wireless penetration rate at 40 percent.

“While we are gradually approaching penetration rates here in the United States that come closer to the 70 and 80 percent levels seen in Europe, there is still a tremendous opportunity for growth in the wireless voice industry,” said John Oyler, president of Telephia. “Competition within markets is fierce and here to stay, and as providers continue to refine and develop their service offerings, consumers will turn to the tremendous benefits of wireless communication in even greater numbers.”

If a quickly maturing market such as wireless voice still has room for growth, it stands to reason that an even more nascent market such as wireless data has plenty of room left to grow.

Not only does wireless penetration differ from market-to-market, but so does wireless churn. Preliminary results of another Telephia study found that among those who had paid for wireless service at some point in the past year, 27 percent had churned (12 percent switched to a new provider; 15 percent had no provider at the time of the study). The other 73 percent of subscribers remained loyal to their provider.

The rate of switching varied considerably among the 10 markets surveyed. While the rate in the Chicago market fell closely in line with the overall average of 12 percent, the churn rate in Dallas-Fort Worth (16 percent) was double that of Los Angeles (8 percent). According to Telephia, such significant rate differences among markets strongly suggest the need for highly targeted customer retention campaigns by carriers.

Many of last year’s churners who had no provider at the time of the survey would quite likely return soon. More than half (53 percent) said they “probably” or “definitely” would return to wireless sometime in the next year. Another 31 percent said they “might” or “might not,” and only 16 percent said they “probably” or “definitely” would not. This indicates that many in this “former customer” segment are still committed to wireless and, given market-specific data in this area, carriers might successfully woo them back.


U.S. Wireless Penetration and Churn Rates
Top 10 US Markets
Market Penetration
Rate
Churn
Rate
New York 38% 13%
Los Angeles 36% 8%
Chicago 42% 12%
Washington, DC 48% 10%
San Francisco 43% 13%
Philadelphia 39% 14%
Boston 48% 10%
Detroit 43% 11%
Dallas-Ft. Worth 42% 16%
Houston 37% 13%
Source: Telephia, Inc.

Worldwide mobile phone sales are projected to exceed 506.5 million units in 2001, a 23 percent increase over 2000 sales, according to Dataquest Inc. This is a slower growth rate than in 2000, when worldwide mobile phone sales were up 38 percent over 1999 sales.

“The rapid annual growth rates of the past several years concealed numerous operational and strategic weaknesses among global handset manufacturers,” said Bryan Prohm, senior analyst for Gartner Dataquest’s Worldwide Telecommunications Group. “However, these deficiencies are now being fully exposed thanks to a more challenging business environment. Supply has finally surpassed demand, and although sales growth will continue, only those manufacturers with a strongly differentiated offering will continue to thrive.”

Western Europe was the No. 1 region for mobile phone shipments in 2000 with 140.5 million units, but Asia/Pacific and Japan is forecast to be the No. 1 region in 2001. The Asia/Pacific and Japan region is forecast to have sales of 169.6 million units in 2001, which will be a 31 percent increase over 2000. Western Europe is projected to have sales reach 166.6 million units, a 19 percent increase over 2000.

North America will be the No. 3 region for mobile phone sales in 2001, as shipments are forecast to reach 90.1 million units, an 18 percent increase over 2000, and Latin America will grow 17 percent, with sales expected to top 42 million units. The rest of Europe, Middle East and Africa is on pace to have sales total 38.2 million units, up 23 percent from 2000.

Dataquest expects the market to continue to have steady growth through 2005, when worldwide mobile phone sales will reach almost 740 million units. The Asia/Pacific and Japan region will continue to lead worldwide sales in 2005 when shipments are projected to reach 280 million units. Western Europe will remain the No. 2 region with sales of 207 million units in 2005.

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