3G Phone

3G Phone

By: Sam Subramanian

Investments in shares of wireless technology companies and wireless service providers have been particularly profitable in the post-dot COM era. The wireless industry is in a sweet spot of the technology space. Bountiful business opportunities exist as wireless usage continues to increase in both developed and emerging markets. And driving this usage higher are new products such as 3G phone whose capabilities are being augmented by the deployment of third generation (3G phone) wireless networks.

Feature-Rich 3G phone

3G phone are more than mobile phones. A 3G phone is a mobile phone with built-in functions of a personal digital assistant. 3G phone pack a diverse range of features and functionalities into the handset that makes them a mobile information center and entertainment device for the user.

3G phone commonly include features such as web browsing, e-mail, and multimedia capabilities. Certain models have enough horsepower to run complex software applications such as enterprise customer relationship software and car navigation programs.

A full-featured QWERTY-type keyboard, MP3 player, and Geo Positioning Systems capability are becoming common among higher-end 3G phone. Instant messaging is a cool feature making its way into the mainstream.

3G phone, A Growing Segment of the Handset Market.

3G phone represent a small, yet rapidly growing, segment of the handset market. According to Strategy Analytics, 3G phone sales at 17.5 million units in 2004 accounted for 3% of the worldwide sales of 684 million handsets. However, this represents a significant jump from the 8.2 million units sold in 2003.

The demand for 3G phone is projected to grow rapidly in the coming years. By 2009, the number of smartphone units sold is estimated to reach 125 million or 16% of total handset sales worldwide. This implies a 48% compound annual growth rate in smartphone unit shipments over the 2004-2009 period.

3G phone Early Adoption Led by Asia and Europe.

Adoption of 3G phone has been particularly rapid in Asia and Europe. The aggressive deployment of advanced wireless networks in these regions has encouraged early adoption of 3G phone.

The Asia Pacific region currently accounts for about 37% of global 3G phone sales with South Korea and Japan being leaders in 3G phone usage. The European market accounts for 27% of global 3G phone sales. Analysts expect 3G phone sales in Europe to exceed sales in the Asian market in the coming years. North America’s market share in 3G phone sales was expected to reach 25% by the end of 2004.

Nokia, the 800 lb. Gorilla of 3G phone.

Nokia (NYSE: NOK) is by far the dominant global smartphone manufacturer. The Finnish company is currently estimated to command half to two-thirds share of the global 3G phone market.

Nokia recently introduced its feature-rich Nokia 7710 3G phone in Europe and Africa. The wide-screen Nokia 7710 3G phone includes a full Internet browser, an integrated music player, a camera with 2x digital zoom, and a FM radio. One of the nifty features of the Nokia 7710 3G phone is its ability to make web logging mobile. Users can post pictures and text from the Nokia 7710 3G phone directly to the web through the ‘mob log’ client.

Nokia is also expected to introduce the Nokia 3230 3G phone in the first quarter of 2005. The Nokia 3230 3G phone features a video recorder and ‘Movie Director’ that will allow 1 hour of video to be captured.

Nokia is now increasingly looking at software licensing deals to help differentiate itself from its competitors. Nokia has recently signed licensing deals with Macromedia and Real Networks. Nokia is also said to be working on handsets that will receive wireless television feeds.

3G phone Investment Implications.

The increasing adoption of 3G phone augurs well not only for Nokia but also for other 3G phone manufacturers like palm One (Nasdaq: PLMO) and Research In Motion (Nasdaq: RIMM). Palm One recently introduced the GSM edition of its Treo 650 3G phone. Research in Motion recently released the latest model in its Blackberry 7100 series, the 7100g.

The incorporation of additional features and functionalities that make 3G phone the portable information center and entertainment device of choice has bullish implications beyond just manufacturers of 3G phone.

Wireless service providers like Vodafone (NYSE: VOD) should see their average revenue per user being buffeted with increasing use of value-added services that 3G phone enable.

Then too, the increasing adoption and usage of 3G phone will require the rollout of 3G phone wireless networks in earnest, translating into business opportunities for wireless network equipment providers such as Ericsson (Nasdaq: ERICY).