FOCUS: Sales of Cell Phones in Russia Seen Slowing Down in 2006
MOSCOW, Mar 9 (Prime-Tass) -- In all likelihood, 2005 was the last boom year for mobile handset sales in Russia. The government crackdown on illegal imports of handsets and lower demand are likely to result in slower sales although the average price of phones is likely to increase, analysts said.
Mobile handset sales in Russia rose to 33.5 million units in 2005 from 30 million units in 2004 and are expected to increase to 36.1 million units in 2006, according to J'son & Partners' estimates. Analysts at Mobile Research Group (MRG) expect sales to increase to 36-39 million units this year.
According to J'son & Partners, the average price of sold handsets rose to U.S. $165 in 2005 from $146 in 2004. Analysts expect that the average price will grow further in 2006 as credit becomes available to more consumers.
Russia?s largest mobile handset retailer Euroset estimated the average price of handsets bought on credit to be about $70 higher than the price of handsets bought for cash. About 15% of phones sold in 2005 were purchased on credit, Euroset said in its research in late January.
In 2005, Samsung accounted for 23.58% of total handset supplies on the Russian market, while Nokia accounted for 21.79%, according to MRG. Motorola accounted for 19.80%, Siemens for 12.6% and Sony Ericsson for 11.11%. Smaller producers accounted for the rest of the market. Analysts said that the market leaders are likely to continue fighting for the top market position in 2006.
"The two companies (Samsung and Nokia) will compete for the first place on the Russian market in 2006, with Nokia having advantages in the struggle," MRG said in recent research, adding that Samsung has a poorer range of models, especially of smart phone models.
"Nokia gained leadership in October-December 2005, mostly thanks to the position of Euroset, which had, and still has, a directive to primarily sell Nokia before all other brands," MRG added.
Euroset said in its recent report that in December 2005 Nokia accounted for 33% of Euroset's total sales, while Samsung accounted for only 5%, attributing the fact to Samsung's distribution policy, which "neglects the market reality."
Euroset is Russia's largest mobile handset retailer with 2,854 outlets in Russia as of January 1 and 2005 sales revenue standing at U.S. $2.574 billion.
The relationship between mobile handset producers and retailers may play an even more important role in the future, as the largest retailers continue to expand their market share.
According to Sotovik research agency, the top 10 Russian mobile handset retailers accounted for 20% of the market in December 2003, 45% in December 2004, and for 72% in December 2005. In December, 48% of the market was controlled by the top three companies.
Sergei Kolyada, Sotovik's chief editor, expects that in 2006 the top 10 companies will control 83%-85% of the market by the end of the year.
Analysts said that the police and custom service?s attacks on illegal importers of handsets last year had a positive impact on the market. The retail market has consolidated in the last few months as many small regional companies were unable to import merchandise on their own and were bought out or signed franchise agreements with larger market players.
"The customs service has eliminated all channels of illegal imports through Moscow terminals, where companies set too low a price for imported merchandise. However, the same channels remained untouched in St. Petersburg," MRG said in a report released in February.
Most mobile handsets were imported illegally in the previous years but the trend was broken by police in mid-2005. Now major retailers sell more phones imported legally, analysts said adding that this has pushed the average price further up.
Analysts said that the consolidation of the mobile handset retail market is likely to continue.
The customs service said in late 2005 that 3.1 million mobile handsets were imported to Russia in October 2005, up from 1.8 million units in August 2005. The total value of mobile handsets declared at customs rose to $436 million in October from $43 million in August, the service said, adding that the average price of a mobile handset at customs clearance rose to $135 in October from $24 in August.
Sergei Savin, analyst for J'son & Partners, said that continuing gray imports include a wide range of models produced specifically for the Russian market but also models produced for other markets or those that were introduced on other markets earlier than in Russia. As many Russians are ready to pay a higher price to get new models that are not yet sold in Russia, this becomes a major factor in increased demand for illegal imports, Savin said.
But this year producers may start importing phones themselves, market sources said adding that this will help decrease illegal imports and push prices up.
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Posted to the site on 9th March 2006
