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Wireless phone sales ringing slower

A new report shows that owners of mobile phones are slow to upgrade, despite a drop in prices. Fancy features seem to be the real carrot on a stick.

Owners of mobile phones are slow to replace old phones with new ones, despite a drop in the average selling prices for handsets, according to report released Thursday.

Wireless subscribers are replacing phones every 18 months on average, compared with a average replacement rate of every 16 months in 2000, according to a study by J.D. Power and Associates. The study surveyed more than 5,000 households.

Slowing handset sales aren't a good sign for an industry still working to get back on its feet. However, analysts say the situation may only be temporary.

"I don't think there is anything wrong with the handset industry. I think this is just a reaction to the recession," A.G. Edwards analyst Greg Teets said. "As the economy improves, it will help spur sales."

The average selling price for mobile phones in 2002 is $75, down from an average price of $100 in 1999, the report found. Yet lower prices haven't seemed to spur consumers to grab new devices, said Kirk Parsons, senior director of wireless services for J.D. Power.

"People need a compelling reason to get a new phone, whatever the price range," Parsons said. A.G. Edwards' Teets agreed, saying new phones, despite lower price tags, need advanced features to lure customers.

"Color screens have done well. Also, in the past, smaller phones, longer battery life and Bluetooth" (a wireless technology that allows phones to connect to computers) have helped spur sales, he said.

Additionally, the percentage of customers who received a free phone with a new wireless service subscription jumped this year to 28 percent, from 20 percent in 2000.

Premium phones--costing $150 or more--often carry the latest mobile technology, Parsons said. Premium features can include color screens, digital cameras and the capability for multimedia messaging.

The report found that when looking to purchase a mobile phone, customers look for design, certain features, ease of use, battery life, and durability. Sanyo ranked the highest among the top handset makers according to customer preference, followed by Motorola and Samsung (which tied), and Kyocera.