Softer economy may hurt cell phone sales

USA Today

The world's love affair with the cell phone might be cooling off faster than expected.

During the past five years, wireless service providers were flooded with new customers. While no one expected the lucrative times to last forever, they were expected to stick around until 2005 or 2006. Now signs suggest that the softening economy is taking a toll on the industry.

• Growth in the business market is stagnating for the first time in five years, says ResearchPortal.com, which slashed its forecast this month. The segment grew 14 percent from 1999 to 2000 but has since dropped to a 6 percent growth rate and isn't expected to pick up in the next two years.

• New customers are no longer gravitating toward high-end calling plans, and wireless companies are having to adapt. "We're heading to other (market) segments, like prepaid plans," says AT&T Wireless chief executive officer John Zeglis.

• Long-promised data services, which were supposed to create revenue growth after the voice market was saturated, have failed to catch on. At the end of 2000, only 2 percent of the 108 million mobile-phone subscribers in the United States were paying for data services at least once a month, the Yankee Group says.

Yet wireless remains an outstanding performer in the struggling telecommunications industry. AT&T Wireless, Verizon Wireless, Sprint PCS and Cingular all reported strong wireless subscriber growth during the first part of 2001.