Wireless subscriber numbers continue to rise, but not all vendors are enjoying the trend.

If the first few weeks of the new year are any indication, 2008 promises to be a tumultuous financial period for wireless telecom stocks. With the notable exception of Sprint Nextel, major wireless U.S. carriers have done well in revenue and subscriber growth, but infrastructure and handset vendors are all over the board.

The analyst firm UBS recently predicted “moderate” growth in the wireless telecom industry globally during 2008, with an 11% increase in handset sales but just 3% growth in wireless capital expenditures. UBS also says it believes there were 3.37 billion wireless subscribers globally to start the year, while Nokia is forecasting cellular users will reach 4 billion before the end of the year.

UBS expects 1.26 billion handsets to be sold this year, with emerging market sales growing 20%, W-CDMA handset sales increasing 56% and “converged” devices sales rising 45%. Overall wireless industry growth will slow in 2008 to 7.5%, down from 10.4% in 2007, the analyst firm says.

“It feels like it was only recently that the industry was celebrating reaching 1 billion subscribers and overtaking fixed-line penetration globally (five years ago),” UBS said in a research note. “Now, the handset market has passed the 1 billion mark and in many parts of the world (Africa especially), mobile phones are the sole form of communication.”

UBS also notes that wireless penetration has surpassed 150% in both Italy and Luxembourg, while also saying emerging markets will continue to provide the strongest growth in subscribers in the coming years because of GDP and population growth in those regions.

WINNERS & LOSERS
In the United States, AT&T started the year by reporting its best-ever quarterly increase in subscribers, up 2.7 million in the fourth quarter for 70.1 million total subscribers. The carrier also reported a 16.3% increase in total wireless revenues, including an increase in data revenues of 57.5%. Part of the subscriber growth was due to AT&T’s acquisition of Dobson Communications, which added 1.7 million subscribers.

2007 Mobile Phone Market Share (Thousands of Unit Shipments)
2007		2007	2007
Rank	Company Name	Shipments	Market Share
1	Nokia	437,100	38.0%
2	Samsung	161,100	14.0%
3	Motorola	159,000	13.8%
4	Sony Ericsson	103,400	9.0%
5	LG Electronics	80,500	7.0%
	Others	208,900	18.2%
	Total	1,150,000	100.0%

AT&T’s total wireless revenues were $11.4 billion in the fourth quarter and it was the sixth consecutive quarter of wireless revenue growth, as well as sixth straight quarter of ARPU growth, reaching $50.28.

The No. 2 U.S. operator, Verizon Wireless, also had a strong fourth quarter. It added 2 million net subscribers for a total of 65.7 million. The carrier’s fourth quarter revenue reached $11.4 billion, 13.3% higher than the same quarter in 2006. Retail ARPU was up 1.4% to $51.49. Total data revenue reached $2.1 billion total and data ARPU was $11.06. Lehman Brothers says Verizon Wireless has the highest data ARPU with 21.5% of total spending.

Meanwhile, Sprint continues to bleed. The operator says it had a net loss of 885,000 subscribers in the fourth quarter, including 683,000 high-value post-paid subscribers. It has announced plans to eliminate 4,000 jobs and close 8% of its retail stores, saving about $800 million annually.

Sprint also says it likely will write off $30.7 billion in “goodwill” assets, an accounting term for the difference between what is paid for acquisitions and what the assets are worth. The write-off relates to Sprint’s acquisition of Nextel in 2005. Assuming Sprint does take the loss, it will be one of the largest write-downs in U.S. corporate history. Sprint will announce its Q4 financials, including the amount of the write-down, on Feb. 28.

T-Mobile USA, through its parent Deutsche Telekom, reported it has signed up 951,000 net new subscribes in the fourth quarter, up from 857,000 net ads in the previous period. Quarterly churn fell to 1.8%, compared to 2.1% a year earlier. Deutsche Telekom also plans to release its full financial results on Feb. 28.

INFRASTRUCTURE
On the infrastructure side, Ericsson signaled what is expected to be a flat year for the industry. The world’s largest mobile infrastructure manufacturer reported a decline in fourth quarter profits of 42% to $886.7 million and says it will cut at least 1,000 employees in Sweden and as many as 4,000 globally.

CEO Carl-Henric Svanberg told reporters he expects good growth in the professional services sector but that margins will remain tight in network equipment sales.

“The continued rapid buildout of mobile communications in emerging markets and our significant market share gains have resulted in a higher proportion of new network builds with initial lower margins” Svanberg said. “The market growth slowed during last year and for 2008 we find it prudent to plan for a flattish mobile infrastructure market.”

Ericsson had issued a profit warning in October, which resulted in its shares losing half their value, going from a per-share price of about $42 in October to about $22 in early February.

Ericsson’s networks business unit actually performed as well as most analyst expected, but its new multimedia division suffered unexpected losses. The latter division lost $68.97 million in the fourth quarter, compared to an $82.81 million profit a
year earlier.

HANDSETS
On the handset side, Nokia performed as if there hasn’t been any economic downturn. The largest handset maker shipped 133.5 million handsets in the fourth quarter, up 19.5%, and now has a 39.5% market share. Analysts noted Nokia’s growth was even greater than the impressive 18.9% growth of No. 4 Sony Ericsson.

UBS noted Nokia is succeeding by reducing costs with single-chip handsets and selling into emerging markets. The company shipped 437.1 million phones last year. Its market share is nearly three times of its closest competitor, Samsung, which has a 14% share.

The research firm iSuppli said Nokia’s annual growth in phone shipments of 26.5% was far greater than the 16.5% rate for the entire handset industry.

Nokia’s extraordinary performance made Motorola’s financials look even dimmer. Motorola’s stock price is at a 52-week low as it announced it might spin off its mobile devices business because of falling sales and market share. The company said in an SEC filing it is “exploring the structural and strategic realignment of its businesses” in an effort to revive its handset business.

CEO Greg Brown said in the filing that Motorola is exploring ways in which the “mobile devices business can accelerate its recovery and retain and attract talent while enabling our shareholders to realize the value of this great franchise.”

Motorola at one time was the world leader in handsets, back in 1995 when it had a 31% market share, but now is No. 3 with a 13% share. UBS said in a research note it was lowering its forecast for Motorola handset sales in 2008, from 162.4 million to 158.2 million, while at the same time raising its handset industry forecast from 1.23 billion to 1.26 billion.

It is hard to glean whether the ups and downs of various players are due to challenging economic issues in the United States and around the globe or if the sagging fortunes of some companies are leading indicators of tough times ahead. For now, it appears it could be a little of both.