Mobile phone sector looks set to profit in 2002

Finnish mobile phone giant Nokia has reported better then anticipated profits for the fourth quarter, defying predictions of a downturn in performance in the telecoms sector.

The firm revealed earnings of £1.01 billion (1.63bn euros) before tax and one-off charges, a figure that was down on the 1.77bn euros reported one year ago, but in excess of analysts’ predictions for the quarter.

Nokia chief executive and chairman Jorma Ollila commented: “As we enter 2002 our strategic position is better than ever. I am more than happy with Nokia's fourth quarter performance.

“We achieved significant market share gains maintaining excellent profitability in our mobile phone business and succeeded in substantially reducing the impact of a challenging environment on our networks business."

Handset sales across the sector decreased dramatically throughout 2001, due to market saturation and the slower than expected introduction of advances such as GPRS and third-generation mobiles.

However, recent research into mobile phone firms throughout Europe has painted a brighter picture than was initially estimated for a sector hard hit by profit losses and increasing debt.

The report estimated that market saturation could now work in the companies’ favour, as the cost of acquiring a new customer works out at around £200 – an expensive amount that is divided numerous ways before the true amount of profit becomes apparent. Some firms were spending almost 25 per cent of all operating expenses on signing up new subscribers.

However, based on the principle that it’s cheaper to sell to an existing customer than to acquire a new one, the introduction of third generation handsets could persuade customers to upgrade to take advantage of the new services, thereby ensuring a profit for mobile phone firms for some time to come. (CL)