Mobile phone market needs 3G, says Carphone Warehouse

• Tags:
• Charles Dunstone,
• Mobile Slump,
• 3G,
• Financial Results

Graeme Wearden GameSpot Europe

Published: 23 Jan 2002 16:58 GMT

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Carphone Warehouse is relying on GPRS and 3G handsets to boost its business in the second half of 2002, after the company warned on Wednesday that the tough state of the European mobile market will damage its earnings for this year.

Announcing its third-quarter results on Wednesday, Carphone Warehouse told investors that revenue in the 13 weeks to the end of December were 5 percent down on the same period a year before. Carphone Warehouse's financial year will end on 31 March, 2002, and company chief executive Charles Dunstone has forecast that full year earnings could be up to 10 percent lower than market predictions.

Following the boom in the mobile phone market, few analysts are surprised that companies such as Carphone Warehouse are finding life tougher. In December 1999 and 2000, mobile phones were very popular Christmas presents, but the problem that retailers and manufacturers now find is that the market has become largely saturated.

This is borne out by Carphone Warehouse's latest figures. In the four weeks before last Christmas, the firm achieved 303,000 connections -- sales of both pre-pay and contract phones -- in the UK, compared to 318,000 for the same period a year earlier.

Dunstone warned the City that the mobile market will remain tough for the next six months, but that Carphone Warehouse is hoping customers will begin upgrading to more high-tech devices towards the end of this year. "From this autumn onwards we believe that a combination of new handset functionality and innovative technology will once again stimulate the market," Dunstone said in a statement.

Vodafone, mmO2 and Orange have all launched consumer GPRS networks, which support higher data transfer rates than GSM networks. Take-up has been slow so far, but it is hoped that more customers will upgrade as more GPRS handsets are launched.

While some operators are expected to hold back the launch of their 3G networks until 2003, Hutchison 3G is fully committed to launching its high-speed mobile network in the second half of 2002. As a newcomer to the market, the firm is expected to invest heavily in marketing, and possibly in subsidies, and this could provide the mobile sector with the boost it needs.

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