Forecast: Total U.S. spending on wireless will grow by 9.3 percent

Feb. 14, 2005 - TIA report says wireless subscriber base will continue to expand this year.

Total U.S. spending on wireless communications will grow by 9.3% in 2005, achieving a total of $158.6 billion, according to the newly released TIA's 2005 Telecommunications Market Review and Forecast.

The forecast is an annual publication of the Telecommunications Industry Association (TIA). The report predicts the wireless market will reach $212.5 billion by 2008, with a 10% compound annual growth rate (CAGR) from 2005 to 2008.

The U.S. wireless market consists of transport services, handsets, capital expenditures and infrastructure equipment including Wi-Fi equipment plus the emerging market for broadband access (e.g., WiMAX) equipment and professional services in support of the wireless infrastructure. Revenues in 2004 totaled $145.1 billion, up 11.6% from 2003. The increase in 2004 marked a return to double-digit growth following a dip to mid-single digits in 2003. This uptick in wireless communications spending was driven by faster growth in handset revenue from new models, increased revenue from Wi-Fi equipment and a rebound in support services.

The study predicts that the U.S. wireless subscriber base (wireless telephony and paging) will continue to expand, but at single-digit rather than double-digit rates. In 2004, there were 173.7 million wireless subscribers, up 9% from 2003, most of these -- 163.1 million -- were wireless telephone subscribers. Between 1999 and 2004, the number of wireless telephony subscribers more than doubled. The principal driver was the introduction of one-rate pricing plans in 1999. Wireless became less expensive than landline for many people, thus spurring an increase in wireless subscribership. With a majority of the population already subscribing to mobile phone service, growth in the wireless universe will begin to slow and drop to single-digit increases beginning in 2005 with growth averaging 5.2% on a CAGR basis through 2008 to roughly 200 million wireless communications subscribers.

As subscriber growth diminishes and the wireless subscriber market reaches maturity, rising prices associated with new applications and plans such as wireless Internet access, text messaging, instant messaging, ring tones, wireless games, multimedia messaging services and Wi-Fi technologies will drive the market. Spending on wireless communications services is expected to rise by 11.1% in 2005 reaching $113.1 billion, and to expand at a 10.4 CAGR reaching an estimated $151.1 billion in 2008.

The wireless phone market was buoyed by continued subscriber growth and upgrades to more sophisticated handsets. After slowing in 2001 and 2002, wireless communications handsets rose at double-digit rates in 2003 and 2004, reaching $10.1 billion and $11.0 billion respectively. Spending on wireless communications handsets will grow from an estimated $11.5 billion in 2005 to $13.8 billion in 2008, growing at a 6% compound annual rate.

"The double-digit increases in the wireless market clearly indicate that it is a key driver in the communications industry," says TIA President Matthew Flanigan. "With the introduction of new technologies and services such as 3G wireless services, Wi-Fi and WiMAX, we will continue to see an increase in wireless infrastructure revenue. Prices associated with these new applications and one-rate pricing plans continue to attract subscribers and will boost spending on wireless communications services."

The TIA is based in Arlington, VA. For more information visit www.tiaonline.org.

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