Cellular revenue hit record high in 2005 says iSuppli

Mobile phone industry revenue reached an all time high US$115.1 billion last year as more people around the world either upgraded to better mobile phones or became subscribers, according to market researcher iSuppli Corp.

But 2006 won't be nearly as strong because slowing subscriber growth and falling prices for new handsets are cutting into industry revenue, iSuppli said in a report. Mobile phone industry revenue will likely drop 4.7 percent this year to $109.7 billion, according to the El Segundo, California researcher, adding that it doesn't expect the industry to recover the $115.1 billion mark again until 2009.

"With most worldwide markets saturated, growth in mobile phone manufacturing is being driven by replacement sales, rather than by new subscribers, leading to slower growth," iSuppli said.

Total unit shipments of mobile phones will rise this year, iSuppli predicts, to around 850 million units, up from 810 million units last year. But, on average, handsets sold in 2006 will be cheaper than 2005, which is the main culprit behind falling industry revenue, according to iSuppli.

But what's bad for companies looks like it will be good for users, which should see lower priced mobile phones this year. The average price of a new handset this year should be about $129 per unit, down 9.2 percent from $142 last year, according to iSuppli.

Manufacturers work hard to drive down the cost of mobile phone parts every year in order to increase output and meet price targets. This year, prices are being driven down by the push for more low-end, ultra low cost mobile phones aimed at emerging markets, and greater pressure by 3G (third generation) mobile service providers to reduce the cost of high-end handsets, iSuppli said.