Smartphones not enough for carriers at CTIA

RELATED NEWS Over 330 mobile towers sealed across Delhi: Sources Mobile tower sealing: COAI yet to receive notice I-T Dept probing TDS shortfall from mobile cos: Sources Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

Smartphones may be one of the hottest areas in technology with big names like Apple and Google tussling for share, but investors are questioning the growth prospects for mobile carriers as subscriber gains slow.

While it is true that clever devices like the iPhone or Android phones will boost demand for advanced wireless services such as video, games and mobile web, analysts worry that returns from such services cannot sustain revenue growth.

Mobile subscriber growth is slowing as about 90% of people in the United States already own cellphones.

Expectations for new subscribers are already lower than usual for the current quarter, which ends days after the March 23-25 CTIA wireless show in Las Vegas.

First-quarter subscriber additions typically tend be 5% - 10% lower than in the busy fourth-quarter holiday season. But this time, analysts see as much as a 15 percent drop in additions of monthly bill-paying customers, known as postpaid subscribers.

Against this backdrop, operators such as AT&T Inc and Verizon Communications Inc are expected to focus on advanced mobile services at the CTIA show. Carriers can charge smartphone users extra monthly fees for data services, such as Internet access and texting.

Analysts say that will not be enough to offset falling voice revenue and the cost of supporting data services.

"You can wave your arms about data all you like, but the reality is that the revenue growth for the US wireless industry was only 2.6% by the end of 2009," said Bernstein analyst Craig Moffett.

"It's just not a growth business any more," he said, forecasting a 10% sequential drop in postpaid subscriber additions industry wide in the first quarter.

Pacific Crest analyst Steve Clement expects a 10 percent to 15 percent drop saying, "Demand on the postpaid side has been pretty tepid."

He said the weakness is partly due to the fact that operators themselves pulled some sales forward to the fourth quarter from the first quarter through particularly heavy promotions of smartphones like the Motorola Inc Droid.