Second Quarter 2009 in Review: Mobile

1. Summary

The global recession continues to place downward pressure on the wireless market. Providers in Asia, Europe and North America alike are reporting declining revenues as compared to 2008. In the U.S., Sprint reported first quarter 2009 revenue decline 12 percent compared to first quarter 2008. AT&T also saw revenue decline (although much less significantly than Sprint) at just 1 percent.

AT&T’s relative success is largely due to the iPhone, which continues to dominate the smartphone market. In terms of devices sold, data consumed and usage-driving apps, the iPhone continues to lead the market. With the release of the new 3GS iPhone in second quarter, Apple is expecting to see a surge in device sales over the next several quarters, up from roughly 4 million devices in second quarter to 7 million devices by fourth quarter. Furthermore, according to a report released this quarter, the iPhone dominates mobile browsing. In April, the iPhone accounted for 43 percent of mobile web usage and 65 percent of HTML usage. The iPhone also leads the market in applications, with an app store boasting thousands of applications.

The iPhone, and AT&T, are facing challenges from other devices, however, such as the Palm Pre,the new Google phone (myTouch) and the BlackBerry Curve, which was the top-selling smartphone in the U.S. in the first quarter of 2009. The Palm Pre, which also launched in second quarter, emerges as an iPhone competitor, for which Palm is placing a lot of stock in its success. While the new phone is promising, it is unclear whether it will be enough to save the struggling Palm.

With the iPhone 3GS and the Palm Pre, second quarter 2009 was ripe with device announcements. Netbooks are emerging as a bright spot in a down economy. In addition to handset news, netbooks continue to make waves. Sales of these new scaled-down notebooks are in the tens of millions and are taking a big bite out of notebook sales.  With such strong sales, there is a great deal of competition heating up in the space, particularly among OS creators as they strive to develop a claim on this uncharted territory.

Even in the bleak environment, carriers are positioning their 4G strategies, and the battle between LTE and WiMAX continues. WiMAX had a positive quarter with Clearwire adding Atlanta to the current coverage in Portland, Ore. Additionally, by mid-quarter, Clearwire added 25,000 new subscriptions for the quarter, and users in Portland, Ore., where the service launched in January, are using twice the bandwidth than those in Clearwire’s Pre-WiMAX markets. Intel also made a significant investment of $43 million in Japanese communications provider UQ Communications. This is the latest in Intel’s $2 billion investment in WiMAX over the past 4 years. LTE is also marching forward, and with the DTV conversion finally past, a significant barrier has been removed.

Battles continue to be fought in the mobile market. On the device, carrier and network fronts companies are trying to lay claim to a piece of this rapidly evolving market. The remainder of 2009 promises to lend insight into how the market will develop, fleshing out the winners and losers, both in terms of companies and technologies.