Subject: [NEXTEL-1] Used phones come calling on China mobile market

From: Marcelrf <[email-masked]>
Date: Thu, 01 Apr 2004 00:05:03 -0500

Used phones come calling on China mobile market
http://biz.yahoo.com/rc/040331/tech_china_cellphones_1.html

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Reuters

Used phones come calling on China mobile market
Wednesday March 31, 12:24 am ET

By Doug Young

SHENZHEN, March 31 (Reuters) - Ji Zhihuang is the kind of
person cellphone makers in China would rather tune out.
Operating from his stall in the bustling Tongtiandi market
in the southern boomtown of Shenzhen, Ji spends his days
singing the praises of used phones to crowds of
budget-conscious chatterers.

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His trade is spreading quickly in the world's biggest cell
phone market, fuelled by the growing ranks of everyday Chinese
who, at an average monthly income of 706 yuan (US$85) in the
cities and 218 yuan in the countryside, are looking for savings
at every turn before going mobile.
"In one day I can sell more than a dozen of these," says
Ji, whose tools of the trade range from toothbrushes for
polishing scuffed casings to blow dryers for blasting out dust.
"The guys next to me can sell 50 to 60 a day. The industry
has developed a lot in the last few years. The quality of used
phones is about the same as new ones since most people have
only owned them for a half year or a year."
Ji, and the dozens of vendors around him who spend their
days cleaning up old phones, pose a growing threat to the likes
of cellphone giants such as Motorola (NYSE:MOT - News) and Nokia
(NOK1V.HE), and homegrown players TCL International (HKSE:1070.HK - News)
and Ningbo Bird (Shanghai:600130.SS - News), which depend on new handset sales
to keep profits growing in China.
A hefty 40 percent of the 62 million new mobile accounts in
China last year came from people using second-hand cellphones,
says research firm Gartner.
Put differently, an estimated 10 to 15 percent of all
cellphones sold in China are now second-hand, other analysts
said.
China isn't alone in its fondness for second-hand phones.
The used phone trade also thrives in developing markets such as
India and Indonesia, said Gartner analyst Nick Ingelbrecht.
In more developed markets like Eastern Europe and the
Middle East, second-hand cellphones also account for a sizeable
10 to 25 percent of new accounts. In the United States and
Western Europe, however, second-hand cellphones are not such a
factor.
About two percent of new U.S. accounts use second-hand
phones, although many phones that are traded-in for new phones
are subsequently exported to developing markets. The rest are
scrapped, said Ingelbrecht.
"The most visible thing is the way in which the collection
and processing of second-hand phones has become more systematic
(in China)", said Ingelbrecht. "They realise there's a real
business opportunity in these markets."
China now has a mobile penetration rate of about 20
percent, in a market dominated by the duopoly of China Mobile
(Hong Kong) Ltd (HKSE:0941.HK - News) and China Unicom Ltd (HKSE:0762.HK - News).
But with most affluent Chinese already signed up for
service, the two carriers aggressively court lower-spending
customers who prefer cheaper handsets and are prime targets for
second-hand phone sellers.
FUELLING RAPID GROWTH
In recent comments to investors and analysts, Matsushita's
(Tokyo:6752.T - News) Panasonic Mobile Communications Co Ltd said
second-hand sales will be a factor in the expansion of China's
handset market this year, where growth is forecast at 12-25
percent.
China is already the world's largest mobile market, with
280 million subscribers at the end of February.
Unit sales this year alone are expected to reach 70-90
million, representing 130 billion yuan in sales and
underscoring the market's importance to cellphone makers.
BNP Paribas Peregrine analyst Marvin Lo estimated that
second-hand phone sales will creep up slowly in the coming
years, eventually topping out at as much as 30 percent of unit
sales.
"The number will go up, but quite slowly, maybe one to two
percentage points a year because of all the new models coming
to the market," he said. "It's a big level, but it also depends
on how long people will keep their second-hand phones."
But market watchers said sellers of new handsets need not
be overly concerned due to the market's rapid overall growth.
To combat second-hand sales aimed at the low end of the
market, manufacturers are also building up their selection of
cheap phones that can sell for as little as 800 yuan each, said
Nomura International analyst Lily Jap.
Second hand phones typically sell in China for 200-300 yuan
less than new handsets.
"A few years ago handsets in China started at 2,000 or
3,000 yuan, but now so many are pricing as low as 800-something
for a brand new handset," she said. "Even Nokia and Motorola
are launching cheap handsets. So that means the market for
secondary handsets could be much smaller going forward."
(Additional reporting by Yukari Iwatani in Tokyo)

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