New Services Expected To Drive Cell Phone GrowthNew Services Expected To Drive Cell Phone Growth

Consumers are acquiring a taste for the whiz-bang services in their cell phones. The increasing appetite for instant messaging, games, and pictures from friends is expected to contribute to the eventual dominance of the cell phone replacement market, technology research firm Allied Business Intelligence said in a study released Wednesday.

Cell phone service providers also are expected to convince more business customers to toss away the old for the new, with services delivering news and stock information, directions to meetings or lunch dates, and access to corporate computer systems to check scheduling or client information.

No single service will convince customers to throw away their voice-only phones. Instead, wireless service companies will have to offer affordable packages, says Kenil Vora, an Allied Business Intelligence analyst. "Everything has to be offered in order for this to succeed," Vora says.

Allied Business Intelligence predicts that the number of replacement handsets will increase from 211 million last year to 591 million in 2008, or from 50% of all shipments worldwide to 85%. The research firm estimates there were 1.1 billion cell phone subscribers last year. That number is expected to increase between 12% and 13% this year to 1.2 billion.

A service strategy is the best way for cell phone providers to relieve the financial pressures they're feeling from building expensive high-speed networks, increased competition, and the free cell phone offers that accompany a one-year contract for service. "Current customer acquisition cost is very high, so they need to get the most money out of existing customers," Vora says.

So who's going to make all these fancy phones? China. Strategy Analytics, a research and consulting firm, says China is becoming known as the "electronics workshop of the world." China now has a 27% share of the world's handset manufacturing market, and a report released Wednesday by Strategy Analytics predicts that number will increase to 46% of the 698 million sets built in 2008.

While countries such as China, Brazil, and Mexico ship the hardware, developed regions such as Western Europe and North America are expected to handle most of the research and development.