Europe : IDC's market forecast for Western European mobile phone shipments in 2005 predicts steady market growth of 12% and significant evolution in market structure, with the converged device segment and WCDMA handsets due to continue the explosive growth witnessed in 2004.

Increased consumer spending directed towards handset upgrades and new 3G services over the Christmas period in the final quarter of 2004 pushed total year shipments towards 144 million units, representing year-on-year market growth of 19%. While converged devices witnessed growth of 40% in 2004 compared to 18% for standard mobile phones, IDC indicates that devices featuring evolved operating systems still only account for approximately 4% of the total mobile phone market.

However, IDC points to announcements from Symbian, Series 60, Windows Mobile, and PalmSource presenting intentions to penetrate broader market segments and the success of devices such as the Nokia 6630 and Orange SPV C500 in consumer segments as drivers of converged device growth in 2005.

Consequently, IDC forecasts growth approaching 70% for such devices in 2005, increasing smart phones' total proportion of the market beyond 6%.

"While in 2004 consumers were predominantly motivated by device form factor and hardware, as consumption of media content increases in 2005, users will increasingly demand a higher specification OS and UI with superior application capability in order to effectively download, manage, and manipulate a range of media content. As long as feature phones continue to neglect the importance of software integration, this represents a significant opportunity for smart phones," said Geoff Blaber, research analyst for European Mobile Devices at IDC.

Coordination with the Christmas period for 3G launches from operators Vodafone and Orange increased momentum with regards to contract and handset renewals/upgrades, as the new services served to reinvigorate the consumer market. 3G service launches and the subsequent increase in 3G handset development saw explosive year-on-year growth of almost 850% in 4Q, driving the proportion of WCDMA handsets to 6% in 2004 compared to 1% in 2003.

IDC forecasts WCDMA handsets to increase to around 13% of total mobile phone shipments in 2005, particularly in light of service launches from T-Mobile and O2 in 1Q and new 3G handsets such as the 6680 from Nokia and Sony Ericsson's K600i. However, GPRS is forecast to remain the dominant standard for the total mobile phone market, in contrast to GSM, which is expected to continue its decline in competition with a growing selection of low-cost GPRS-based, and increasingly EDGE-based, handsets. IDC also notes that while 4Q witnessed a significant increase in the number of available 3G devices, the Series 60 Nokia 6630 was the only smart phone-level device in operators' lineups.

"The wide-scale absence of converged devices featuring WCDMA capability illustrates that 3G is yet to be considered compelling or even necessary for business/enterprise-level applications. To date, there exist more smart phones featuring WiFi than WCDMA, and we expect 3G handset development in 2005 to remain led by consumer-orientated devices rather than enterprise-level smart phones," said Andrew Brown, program manager for European Mobile Devices at IDC.

2004 Vendor Performance
· Nokia - The Finnish vendor compensated for low growth in the middle part of the year with 4Q driving total 2004 shipments beyond 50 million units, commanding a market share of 35%. The strong final quarter performance was driven by a number of product introductions; the 7200 series and 6170 in the feature-phone category witnessing high demand. New smart phone devices such as the 6260, 6630, and 9500 communicator saw the vendor increasing the proportion of smart phones to 7% of Nokia's shipments.

· Siemens - The German vendor continues to suffer uncertainty concerning the future of its mobile phone business. Despite growth of 23% in 2004 consolidating a market share of 16%, a sustained absence of profitability owed in part to a product mix traditionally dominated by low-end handsets - converged devices representing less than 2% of handsets - questions how long the vendor can continue independently.

· Motorola - Motorola had a highly successful 2004 with year-on-year growth of 91% increasing market share to 12%. The vendor's emphasis on design and extensive promotion, particularly among the V range of feature phones, ensured the handsets played a key role in consumer contract renewals - the Motorola PEBL V6, the special-edition black RAZR V3, and the SLVR V8 are also likely to be launched imminently. The widespread release of the MPx220 and MPX in 1Q will see the vendor increase its converged device lineup in
2005.

· Sony Ericsson - Year-on-year growth of 58% in 2004 for Sony Ericsson pushed shipments towards 16 million units, increasing market share to 11%. Sales of feature phones such as the K700i and S700i within contract renewals drove the volume of shipments while the UIQ P900 and P910i in the smart phone category found significant demand in business/enterprise segments forming 4% of total handset shipments.

· Samsung - Despite a poor final quarter, Samsung witnessed growth of 41% in 2004 increasing market share to 10%. Shipments continued to be driven by the E800/850 as well as the new D500 and WCDMA Z107. Samsung remains the only top 5 vendor without a converged device although press speculation suggests a smart phone will be launched in 2005.

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