The wireless phone industry is in such disarray that Merrill Lynch recently made the unusual move of recommending that its investors reduce or sell their shares in companies offering mobile-phone services.
Merrill Lynch said its negative outlook applied to the entire industry and was due to a number of recent events:
- On June 5, Airgate PCS (PCSA) said it expected fewer subscribers than it originally anticipated in the second quarter of this year. Alamosa (APS), a Sprint PCS business partner, also revealed a missed subscriber goal on June 13.
- On June 7, credit ratings agency Moody's lowered long-term ratings for Sprint.
- At a competitor's conference on June 11, BellSouth's chief financial officer, Ron Dykes, said consolidation among the top three wireless firms would be difficult because of regulatory hurdles.
- Cingular Wireless and Verizon Wireless have been offering competitive rate plans since the beginning of this year. Cingular and Verizon, the two top wireless firms in the country, have also been bundling services after losing market share the last three quarters.
- On June 13, Sprint PCS said it expected to gain 300,000 new customers in the second quarter of this year, compared to the 650,000 new subscribers Merrill Lynch forecast. In addition, Sprint PCS expects to gain 2.55 to 2.7 million customers in the year 2002, short of Merrill Lynch's estimate of 2.85 million new subscribers.
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The state of wireless in India: While financial analysts in India aren't rushing to revise their forecasts, the market has suffered a sharp decline in new subscribers.
The Indian cell-phone industry added 275,393 new customers in May, down 3 percent from April. In April, that number slid 28 percent from the previous month, according to data supplied by the Cellular Operators Association of India.
The number of new subscribers in India, one of the world's fastest growing cell-phone markets in the world, has declined in the last two months since the government began requiring prepaid card users to provide proof of identity and all cell-phone owners to file tax returns, analysts said.
In April, the Indian government added cell phones to a list of items that require citizens to file an income tax return. The other five items are a house, car, home telephone, credit card and foreign travel.
Agricultural workers, who make up 60 percent of the workforce, the self-employed, tradesmen and shopkeepers never declare their income to the government.
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Unanswered calls for 3G: A lack of phones that support next-generation (3G) wireless services, such as high-speed Internet on mobile phones, is hampering the growth of those services in Finland, Finnish carrier Sonera told 3G Newsroom.
Sonera's vice president Mika Matturi said he doesn't expect to see 3G services pick up in Finland, a cell-phone mecca that is home to handset manufacturer Nokia, until at least 2004.
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E-mail on the fly: While the use of personal cellular phones in flight is still banned, British Airways plans to offer e-mail and Internet access to its passengers.
In a three-month test trial in early 2003, British Airways will give passengers in every seat of certain Boeing aircrafts wireless and plug-in Ethernet access and DC power for their laptops.
The British Aviation Authority prohibits the use of cell phones in flight because they may interfere with cockpit instruments.
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Mobile phone tax in Kenya: In an attempt to raise $10 million for its coffers, the Kenyan government has issued a 5 percent consumption tax on mobile-phone air time.
The tax, expected to have an impact on the urban upper and middle classes, comes at a time carriers have chosen to remove subsidies of handsets and SIM cards.
But the mobile-phone market, which was privatized in 2000, continues to be one of the few industries in Kenya that grows because fixed-line phone service is so poor. Ever since the government deregulated the industry, mobile phone subscriptions have soared to more than 800,000 users today.
There are currently two main players in the market: Vodafone subsidiary Safaricom, and Kencell, owned by Vivendi and local conglomerate the Sameer Group.
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No turning back for Japan: The number of mobile phone subscriptions has eclipsed fixed-line phones, including lines used for integrated services digital network (ISDN), for the first time in Japan, the government said.
The total number of mobile phone subscriptions was 69.12 million at the end of March -– up 13.4 percent from the previous year, the Ministry of Public Management, Home Affairs, Posts and Telecommunications told Kyodo News.
Reuters contributed to this report.
