Mobile Terminals: Middle East, (Executive Summary) Executive Summary

Mobile Terminals: Middle East, 2001-2007 (Executive Summary) Executive Summary Publication Date: 25 July 2003

Authors Carolina Milanesi Ben Wood This document has been published to the following Marketplace codes: TELC-WW-EX-0661 For More Information... In North America and Latin America: +1-203-316-1111 In Europe, the Middle East and Africa: +44-1784-267770 In Asia/Pacific: +61-7-3405-2582 In Japan: +81-3-3481-3670 Worldwide via gartner.com: www.gartner.com Entire contents 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. 116371

Mobile Terminals: Middle East, 2001-2007 (Executive Summary) Introduction In 2002, mobile terminals sales to end users in the Middle East grew 44.3 percent, reaching 10.5 million units. This was mainly thanks to the recovery of the Turkish market after a catastrophic performance in 2001. Sales in Turkey more than doubled in 2002, with 4.8 million phones sold. Market Potential Limited by Secondhand Sales Although the market appeared healthy in 2002, it should be noted that results would have been much higher but for the effect of secondhand sales and the "graymarket,"whichmoveshandsetsoutoftheregion.marketsinturkeyand Israel are characterized by a high number of SIM-only contracts and a buoyant market for secondhand terminals. In Turkey, more than half of net new connections result in a SIM-only or secondhand sale. Sales of new handsets in the Middle East are also limited by the transshipment of mobile terminals to other regions. Mobile terminals that are sold into distribution channels in the Middle East do not always end up in the hands of users living in this region. Countries such as Saudi Arabia and the United Arab Emirates act as conduits for a considerable number of phones sold in Asia/Pacific (for example, in Hong Kong, India and the Philippines). Enhanced Phones Will Dominate All Technologies Are Welcome Manufacturersarerefocusingonentry-levelmobilephonestoaddressthe needs of emerging markets. Gartner has therefore revised its forecast of basic phone shipments. We have extended the period that this segment will remain in the forecast, though it will shrink in favor of enhanced phones. Sales of enhanced terminals will grow steadily, to represent 84 percent of sales in 2007, but the majority of these will fall into the lower tier of this segment. Notable exceptions will be sales in Israel, Saudi Arabia and the United Arab Emirates, where many users buy higher-tier products. Smartphone sales will rise from 0.9 percent of the total in 2002 to 8.0 percent by the end of 2007. Sales of wireless clamshell and tablet personal digital assistants will remain limited to a niche market as more smartphones offer similar features in a smaller form factor. The Middle East offers a wide variety of mobile network technologies, from time division multiple access (TDMA) to different types of code division multiple access (CDMA), and from Global System for Mobile Communications (GSM) to general packet radio service (GPRS) and Enhanced Data Rates for GSM Evolution (EDGE). GSM, the preferred technology for many years, is giving way to GPRS as mobile operators in the Middle East focus on data services and as manufacturers produce fewer handsets that do not support the technology. Wideband CDMA (W-CDMA) will remain a niche technology, representing only 0.2 percent of handset sales in 2007, largely because of the presence of cdma2000 1x. Operators in the region have expressed little interest in W-CDMA networks. Turkey canceled its auction of spectrum for third-generation services in 2000, because bidders were not prepared to offer the minimum price of $2.5 billion. 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 1

2 Mobile Terminals: Middle East, 2001-2007 (Executive Summary) TDMA will die out in 2005, and EDGE will be a natural replacement, representing 2.3 percent of total handset sales by 2007. Although Integrated Digital Enhanced Network (iden) technology is currently limited to Israel, networks will appear in other countries as Motorola increases its presence in the region. Conclusion Sales of mobile terminals in Middle East will grow in 2003 and 2004, but stagnate for the following two years. The market will pick up in 2007, signaling the start of a new replacement cycle. Figures 1 and 2 show mobile terminal sales to end users by device category and technology in the Middle East between 2002 and 2007. Figure 1 Mobile Terminal Sales to End Users by Device Category: Middle East, 2002-2007 14,000 12,000 10,000 8,000 6,000 4,000 Thousands of Units Wireless tablet PDA Wireless clamshell PDA Smartphone Enhanced phone Basic phone 2,000 0 2002 2003 2004 2005 2006 2007 116371-00-01 Source: Gartner Dataquest (July 2003) 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 25 July 2003

Mobile Terminals: Middle East, 2001-2007 (Executive Summary) 3 Figure 2 Mobile Terminal Sales to End Users by Technology: Middle East, 2002-2007 Thousands of Units 12,000 10,000 8,000 6,000 4,000 2,000 TDMA CDMA 95 cdma2000 1x GSM HSCSD GPRS EDGE W-CDMA iden 0 2002 2003 2004 2005 2006 2007 116371-00-02 Source: Gartner Dataquest (July 2003) Links For the full report, please see "Mobile Terminals: Middle East, 2001-2007," which is published to the Mobile Communications Worldwide and the Telecom Equipment Europe Clusters: TCMC-WW-MS-0482 TCTE-EU-MS-0410 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 25 July 2003