UBS: Fewer Americans will upgrade to a new smartphone this year

A report in Monday's Wall Street Journal notes that upgrades to new handset models have been dropping over the last few years. In 2012, 68 million Americans upgraded to a new smartphone, 9% fewer than the number that upgraded their phone the previous year. Even though AT&T and T-Mobile have recently introduced new upgrade plans that allow users to buy new phones multiple times per year, investment house UBS still expects fewer Americans to upgrade to a newer model in 2013. Their estimate calls for a milder 1.9% drop in the number of people upgrading to a new phone in 2013.

One of the reasons for this declining trend in upgrades is the 70% of contract subscribers that already own a smartphone, so fewer mobile phone owners need to upgrade to a smartphone. And those already with a smartphone are not finding enough innovation in the newer models to make them feel compelled to update. Kevin Packingham, chief product officer of Samsung Telecommunications America, says that while innovation hasn't slowed, it isn't easily seen in new phones as much as a larger screen size used to be.

While it might be harder to get smartphone owners to feel that they have to have the latest phone, it might take a new product to show that innovation in the mobile business is not dead. T-Mobile CEO John Legere says that the move to wearable devices could spur more business. Legere said that just before the original Apple iPhone was introduced in 2007, he had heard talk that nothing new was on the way. This time, the executive is looking for big things to come from smartwatches, Google Glass and other products that fit into the wearable devices category. "There is a whole new generation of wearable devices coming that are going to have some impact on the industry," says Legere.

For the mobile carriers, wearable devices might solve the problem of where the upcoming growth will come from, for as UBS analyst John Hodulik says, "Everybody has got a smartphone." Take 26 year old Conner Green of Huntsville, Alabama. With a Samsung Galaxy S II, Green is two generations behind the current Samsung flagship. But Green isn't eligible to update anyway, and says it is also too expensive for him to do so. Whether he is simply talking his position, or really means what he says, Green also states that he hasn't been impressed with the latest smartphone models.


source: WSJ