Samsung Benefiting from the iPhone Effect

Analysts from Merrill Lynch have carried out another of their fascinating visits to phone retailers in the USA to see how the market is reacting, at the front face of the operators, visiting 80 stores in 5 different markets. They report that sales volumes appear to be seasonally in line with expectations for 1Q07.

Reporting across the networks in general, T-Mobile USA seems to be a beneficiary of Sprint's tightened credit standards. Verizon is benefiting from the problems on the Nextel side. Cingular is also benefiting at the lower end through prepaid, but less so on postpaid. Sprint appears to be stabilizing with regard to customer retention, in our view, but gross addition share and average revenue per unit remain risk factors.

They are therefore maintaining their net addition estimates for Verizon Wireless (1.6mn), T-Mobile (750k) and Sprint (?300k postpaid, +200k in total). They are lowering their internal estimate for Cingular net adds from 1.5mn to 1.4mn.

For 2007, they are estimating that subscriber growth will slow in US wireless to approximately 19 million net additions, for an ending subscriber growth rate of about 8% YoY and an 82% penetration. Merrill Lynch still expects that the US wireless industry can achieve a penetration level of greater than 90% by 2009.

The iPhone Effect

Their analysts report that the iPhone is generating a lot of buzz - and increasing traffic at Cingular stores as well as online, based on comments by store personnel. The buzz associated with the iPhone does however seem to have increased demand for the PDA-style Samsung Blackjack, based on the store visits.

Existing Cingular customers who are interested in the iPhone, but do not want to wait, are tending to purchase the Blackjack. The analysts say that they believe these customers feel that they may as well get something now, since the iPhone is not going to be discounted and is not 3G.

Handset Sales

At Cingular, the analysts report that popular 3G choices are the Samsung SYNC (A707) and the above mentioned Blackjack, the LGCU500 and the 3G RAZR. For more basic selections, the Samsung C417, Samsung D807 and the Nokia 6102i are popular. The Sony Ericsson W300i is proving to be a popular selection for customers that want a good music phone.

At Verizon Wireless, popular selections are the LG VX8600, the LG Chocolate, LG VX8300, and the Motorola KRZR. The LG enV and the Samsung U720 are also popular choices, as both have a full keyboard.

Sprint customers are continuing to purchase the RAZR. The KKRZ is reported to have not gained much traction at Sprint stores due to its price. Other popular choices at Sprint are the Samsung m500, a640 and the Blade, the Sanyo Katana and the Sanyo 240 and the LG Fusic.

T-Mobile USA has a number of alternatives to the RAZR, including the NOK 6133, NOK 5300, the Samsung 619, 629 and the Trace. The Blackberry Pearl and T-Mobile Dash are also top sellers at T-Mobile.

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