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About The Mobile Generation
while, times will remain tough for mobile-phone companies. A third
generation of mobile phones with lots of new features promises to revitalise
the business later this year, but there are dark clouds on the industry’s
horizon: renewed worries about the health effects of using mobiles
It is Nokia, the world’s biggest maker of mobile phones, which has provided the industry with its loudest cheer. On January 24th, the Finnish company reported a higher-than-expected fourth-quarter pre-tax profit of euro $1.6 billion ($1.4 billion). The firm expects a weak start to 2002, but after that a strong pick-up in sales. “2002 is the year that we have really got to make it happen,” said Jorma Ollila, Nokia’s chief executive.
Other firms are of a similar mind, even though many are not doing as well as Nokia. On January 25th, Ericsson said that it had made a pre-tax loss of SKr21 billion ($2 billion) in 2001, the largest loss ever recorded by a Swedish company. Ericsson, which not only makes handsets but is also the world’s biggest manufacturer of the equipment used to build cellular networks, was badly hit by cash-strapped operators slowing down their orders. To save costs, it merged its handset business last year with that of Sony. America’s Motorola says that after more than a year of losses it does not expect to see a return to profitability until the third quarter of 2002.
Nokia can afford to paint a bright picture of the future because it has consistently shown that it can sell mobile phones while others struggle. One reason is that Nokia was among the first to realise that cellphones would evolve into products which are far more than just devices used to make telephone calls while on the move. Many of the developed markets are now saturated: up to 80% of people in some parts of Europe already have mobile phones. More than half the sales of handsets in Western Europe are now replacements. To stimulate sales, Nokia has been ahead of most of the pack in turning handsets into stylish fashion items. Handsets with new features that use the third generation of cellphone technology are supposed to encourage even more people to upgrade—especially young people.
Getting the new technology to work has proved daunting. Eventually the technical glitches will be solved. Ericsson said on January 25th that it would not begin the commercial roll-out of third-generation cellphone technology until 2003. The furthest along the road is NTT DoCoMo, Japan’s leading mobile phone operator. Its “i-mode” cellphone service is close to being a full third-generation service. It offers Internet access and has attracted 30m customers in only three years. In October last year, the company rolled out the real thing with the launch of the world’s first third-generation service. This has even more advanced features. The company hopes to have 150,000 users in Japan by the end of the year. In March, DoCoMo plans to list its shares in New York and London, which will make it easier to forge links with overseas partners and expand abroad.
In America, a group of senators are renewing efforts to get the federal government to sponsor more research into the health effects. So far, the work has mostly been done by the industry itself. In May last year, America’s General Accounting Office reviewed the evidence and concluded that, while present research did not demonstrate that signals emitted from mobile phones had adverse health effects, the findings of some studies indicated the need for further investigation. The report was also concerned about the objectivity of industry-funded research on the issue.
The most worrying outcome for mobile-phone firms is that just as an exciting third generation of products comes along to restore their profits, health experts deliver warnings about using handsets—especially to one of their most important markets: young people. This would be a nightmare for the industry. That may not happen. But some operators might think it prudent to turn some of their research into developing mobile phones with screening devices that prevent radiation from affecting the brain. Then again, marketed correctly, phones with such safety features might be sold as just another reason, like snazzy new services, to upgrade.