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Shipments of smartphones to exceed feature phone shipments in 2013

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March 5, 2013

For the first time this year, global shipments of smartphones will exceed feature phone shipments, according to an annual report published by IDC.

Original equipment manufacturers are expected to ship almost 919 million smartphones in 2013, or 50.1 percent of the total mobile phone shipments globally.

According to the IDC report, the shift will be driven largely by a few emerging markets that are just now making the switch to smartphones.

Additionally, IDC notes that smartphone shipments to China, Brazil, and India will comprise a growing percentage of the device type's volume in each forecast year as well.

“Overall, smartphone demand is burgeoning in these populous nations as their respective economies have grown. This has made for a larger middle class that is prepared to buy more smartphones,” the report states.

Melissa Chau, senior research manager of IDC Asia/Pacific, says that China will be at the forefront of driving smartphone sales.

"While we don't expect China's smartphone growth to maintain as strong a pace as it has over the last two years, there continue to be big drivers to keep the market growing as it leads the way to ever-lower smartphone prices and the country's transition to 4G networks is only just beginning," Chau said.

He added that even as China starts to mature, there remains enormous untapped potential in other emerging markets like India a nd Brazil.

Overall, the shift will probably mean slower growth in the years ahead. It will be interesting to see the next IDC report when it comes out next quarter to compare the changes.

In other mobile news

Japanese mobile services carrier NTT Docomo has successfully tested uplink packet transmissions at a super-fast 10 Gbps, hundreds of times quicker than the 4G services just beginning to roll out across North America and Europe.

The experiment was conducted in collaboration with the Tokyo Institute of Technology in Okinawa’s Ishigaki City back in December 2012, NTT revealed late Friday.

The trial tests used 400 MHz of bandwidth in the 11 GHz spectrum, and although only uplink transmissions were tested, the company said that 10 Gbps downlink speeds should be possible with the same equipment, but that further tests are needed.

However, tempering industry enthusiasm a bit is the fact that the mobile station used to transmit the data wasn't a functioning device but a Docomo mini van full power hungry, high-tech equipment and travelling at just 9 kilometers per hour.

“Multiple-input multiple-output (MIMO) technology was used to spatially multiplex different data streams using eight transmitting antennas and no less than sixteen receiving antennas on the same frequency,” explained the operator.

"In light of the tight squeeze on remaining mobile spectrum as data traffic continues to grow, Docomo aims to achieve a transmission speed of more than 10 Gbps using super-high-frequency bands exceeding 5 GHz," the company added.

Although the wireless carrier acknowledged that such high frequencies have historically been no good for long range transmissions, it offered no insight into how it’s planning to overcome this, at least for now.

In the meantime, Japanese smartphone users will just have to put up with the 100 Mbps maximum rate of Docomo’s Xi LTE service. The company said it is continuing its testing and we will update you on further developments.

In other mobile news

While the 112,442 or so signees of a stiff petition to make unlocking phones legal again in the United States await a response from the White House, FCC Chairman Julius Genachowski said that he will look into the matter, and will initiate a new investigation. Recently instituted by the Library of Congress, Genachowski added that the unlocking ban raises competition and innovation concerns across the wireless industry, not just in the U.S. but in other countries such as Canada and elsewhere.

In October 2012, the Library of Congress released new updates to the Digital Millenium Copyright Act that made it illegal to unlock purchased phones without the permission of the wireless carrier through which the phone was acquired.

The major concerns addressed by the petition are that unlocked phones could lead to exorbitant roaming fees and lower resale value of devices after carrier contracts expire.

CTIA noted that the practice of unlocking phones is essential to the wireless industry but that user unlocking had enabled “large scale phone trafficking operations” to buy, unlock and sell pre-paid mobile handsets away from the U.S. market.

CTIA also said that owners of wireless devices do not necessarily own the software on those devices. When the ruling came down, opponents like Sherwin Siy, of consumer advocacy group Public Knowledge, noted that the many issues such a prohibition would cause.

"It's ridiculous to think that copyright laws are intended to prevent people from switching between different phone providers easily," Siy wrote in a blog.

"Instead of being used to reward authors and creators (it's not like the phone firmware is a big cash cow for anyone), it's being used to lock customers in to their existing providers, hurting their ability to vote and switch to a rival."

It’s still unclear yet if the FCC and Genechowski will have much power in overturning the ruling. It will be interesting to observe how all of this pans out in the next few weeks. We will keep you posted.

In other mobile news

Paulson & Company, a Wall Street investment firm owning about 9.9 percent of MetroPCS' stock has said it will vote against the wireless carrier’s proposed merger with T-Mobile USA. The news didn't surprise some people in the industry. In a letter to the executive boards of both MetroPCS and Deutsche Telekom AG, the parent company of T-Mobile, Paulson & Co. cited high debt, high interest rates and high equity risks for MetroPCS shareholders as the main reason for its decision to vote against the proposed merger.

According to the letter, under the current terms of the deal, the net debt of the new company would total $23.2 billion, $15 billion of which would be an intercompany note that carries an “egregiously high” interest rate of 7 percent. The letter also mentioned that “the highly leveraged proposed capital structure hinders flexibility, depresses the pro forma valuation multiple, and creates excessive equity risk.”

Paulson also claims that the equity split of the pro forma corporation, which grants MetroPCS shareholders 26 percent, is unfair to other shareholders.

The letter states that MetroPCS is more valuable as a standalone company, and others agree. Paulson said that “in contrast to MetroPCS’ strong performance, T-Mobile’s performance has been poor.”

Despite these objections, Paulson said it would be willing to reconsider voting against the merger if Deutsche Telekom reduces the debt and contributes to $6.6 billion to the capital structure, and if the interest rate it carries was reduced to 4.2 percent instead.

For its part, Deutsche Telekom repeatedly said it will continue to pursue the merger under the current terms. Since the merger was proposed in October of 2012, MetroPCS’s stock has declined more than 25 percent.

In other mobile news

No matter how you look at it, and even if it's stock hit a new 52-week low today, Apple is still the world's most admired company, bar none, at least in the eyes of executives interviewed by Fortune magazine.

For the 6th straight year in a row, Apple took home the top honors for the title, this year scoring 8.24 on Fortune's ranking point system, ahead of Google with a score of 8.01, and Amazon with 7.28. Overall, Apple was deemed the most admired corporation, despite recent concerns over the company's performance and even after the fact that it's losing some affection from Wall Street.

Its stock has dropped over 34.9 percent since September as investors and industry analysts are worried that Apple's best days may be behind it. Of course, not everyone agrees on that view.

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According to Fortune's description-- "Apple has had a tough time lately with its stock price in a free fall and the widely publicized failure of its Maps feature. But it still remains a very healthy company, posting $13 billion in net income last quarter, making it the most profitable company in the world during that period."

"The company has its fanatical customer base, and it still refuses to compete on price, making the iconic iPhone and iPad products that are still widely seen as prestige devices. Competition may be stiff, but so far it remains behind: In Q4 2012, the iPhone 5 was the world's best selling smartphone, followed in second place by the iPhone 4S," added Fortune Magazine.

In a related story on the company titled "It's lonely at the top for Apple," senior editor-at-large Adam Lashinsky did acknowledge concerns over the stock price and post-Steve Jobs management. But Apple has gotten to the point where people expect miracles from the company, he wrote.

And it seems that when Apple doesn't deliver those miracles, investors and analysts give the company the thumbs down. To be sure, Apple's corporate peers obviously see the current struggles as a short-term blip and continue to believe in the company's long-term potential.

But one question raised by Fortune is whether the "most admired" title is a true sign of Apple's value. "Perhaps the admiration of one's peers is a lagging indicator, akin more to a hall-of-fame vote than to a most-valuable-player award," Lashinsky wrote.

"The company whose late founder aimed for it to be 'insanely great' still remains damn good, and by any standards. The years to come will determine if for Apple, that's good enough," he added.

Beyond Google and Amazon, other tech players among the top 50 included IBM, Microsoft, Samsung, Intel, eBay, Facebook, and Cisco Systems.

Fortune's list of the world's most admired companies is based on surveys from executives across 30 different countries. The companies are ranked on nine separate criteria, including the quality of management, innovativeness, the quality of products or services, the ability to attract and retain talented people, social responsibility, and long-term investment value.

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Source: IDC.

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