CIBC 2008 Handset Guide

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Equity Researc

Industry Update

January 10, 2008 Communication Technology

2008 Handset Market GuidebookMarket Fundamentals Strong: Raising Estimates

We remain bullish on the wireless market and are raising our handset and

subscriber estimates once again. We project handset shipments will grow

from 1.28B (+13.7% YoY) in 2008 to 1.67B in 2011 and subs will grow fro

3.60B to 4.73B in the same period. Overall unit/sub trends are strong.

Tempering our outlook are ASP declines and we look for moderate growth

industry sales. We expect sell-in revenues to climb 9.8% in 2008 to $150BHowever, after 2008, we see the market cooling and project decelerating

sales growth with a '07-'11 CAGR of 5.9% to $172B in 2011.

Top pick is MOT. While in recovery mode, it can deliver expansion in units,

ASP and margins from late '08, in our view. We have a positive bias on

RIMM, given its tier focus and best in class operating profit to unit share

ratio. Neutral on NOK, as strong execution makes it tough to find upside.

We see great value in owning the supply chain, as it benefits from strongunit volume and the 3G transition: RF vendors SWKS and RFMD, with

exposure to the top 5 OEMs; QCOM, which benefits from the 3G transition;

and distributor/logistics king CELL, the largest global player in the segmen

All figures in US dollars, unless otherwise stated. 08-86920 2

CIBC World Markets does and seeks to do business with companies covered inits research reports. As a result, investors should be aware that the firm mayhave a conflict of interest that could affect the objectivity of this report.

Investors should consider this report as only a single factor in making theirinvestment decision.

See "Important Disclosures" section at the end of this report for important

required disclosures, including potential conflicts of interest.

See "Price Target Calculation" and "Key Risks to Price Target" sections at th

end of this report, or at the end of each section hereof, where applicable.

Sector Weighting:

Market Weight

Ittai Kidron1 (212) [email protected]

Joseph Park1 (212) 667-8620

[email protected]

George Iwanyc1 (415) [email protected]


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2008 Handset Market Guidebook - January 10, 2008

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Table of Contents

Executive Summary ...............................................................................Handset Industry Outlook .......................................................................

Handset Shipments .............................................................................Replacement Rate...............................................................................Industry Revenue ...............................................................................

Handset OEM Trends .............................................................................

Market Share Trends ..........................................................................Financial Trends.................................................................................Nokia ...............................................................................................Motorola ...........................................................................................Samsung ..........................................................................................Sony Ericsson ....................................................................................LG Electronics....................................................................................Research in Motion.............................................................................

Handset Shipments ...............................................................................Handset Shipments by Region .............................................................North America ...................................................................................Latin America ....................................................................................Western Europe .................................................................................Eastern Europe ..................................................................................

Asia Pacific ........................................................................................Middle East and Africa ........................................................................Handset Shipments by Technology.......................................................WCDMA ............................................................................................EV-DO ..............................................................................................

Smart Phone Shipments ........................................................................Data Card Shipments ............................................................................Mobile Subscribers ................................................................................

Subscriber Regional Trends .................................................................Developed vs. Emerging Markets .........................................................Penetration Rates...............................................................................North America ...................................................................................Latin America ....................................................................................Western Europe .................................................................................

Eastern Europe ..................................................................................Asia Pacific ........................................................................................Middle East and Africa ........................................................................

Subscriber Technology Trends................................................................


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Executive SummaryWe are raising our handset forecast once again, as the market continues to seerobust demand. We continue to project 2007 global handset shipments of 1,13

million, with 13.8% sequential growth in 4Q07. But we are raising our 2008

handset forecast to 1,284 million, up from our previous estimate of 1,257

million units.

Our revised shipment estimates imply year-over-year (YoY) handset growth of14.6% in 2007 and 13.7% in 2008. We believe our 2008 projections are higher

than current consensus expectations of around 10% YoY growth. While above

consensus, our estimates still have room for upside, in our opinion, and

we do not view near-term component constraints or U.S. inventory build exitin

4Q07 as a sustained issue in our forecast.

We expect the solid industry growth to continue, with shipments topping 1.6billion in 2011. This implies a 2007-2011 compounded annual growth rate

(CAGR) of 10.2%. Trends driving demand havent changed, with decreasing

handset and service prices helping increase penetration in emerging markets

and feature rich, multimedia devices spurring replacement activity everywhere

With both 2G and 3G handsets seeing new price floors and the overall market

mix seeing a higher contribution from emerging markets, we expect the globalhandset average selling price (ASP) to continue to decline throughout our

forecast period. Putting this in perspective, we expect handset ASP to

decline from roughly $121 in 2007 to $117 in 2008 and $112 in 2009 .

While declining, our assumptions reflect more modest price pressure than we

have seen in the recent past (3.4% in 2008 vs. 7.4% in 2007).

While we project strong unit growth, the anticipated ASP erosion would driveglobal industry sales to moderate growthover the next several years. Our

projections imply strong sales growth in 2008 as modest ASP pressure helps th

market climb 9.8% YoY to $150.1 billion. Keys to 2008 include significant

expansion in the high end (Blackberry, iPhone), the accelerating transition to

3G, and a ramping upgrade cycle in emerging markets (which moves low-endASPs up). But after 2008, we see the market cooling and project

decelerating sales growth with a 2007-2011 CAGR of 5.9%.

We continue to see a meaningful transition toward 3G, with mature marketsenthusiastically embracing the technology and emerging markets starting to

build networks. We now expect 3G WCDMA shipments to reach 183.5

million in 2007 (+80.8%) and 289.4 million in 2008 (+57.7%). Both

estimates are higher than Qualcomms WCDMA shipment targets of 182 millionfor 2007 and 284 million for 2008. By 2011, we see WCDMA shipments climbin

to 724.9 million, a 2007-2011 CAGR of 41.0%.

Were once again raising our mobile subscriber estimates. We now project a

2007-2011 CAGR of 10.9%, with subs increasing from 3.13 billion in 2007and 3.60 billion in 2008 to 4.73 billion subscribers in 2011. We see 2007 a

the peak year in annual net subscriber adds, with 2008 the first year sinc

2002 when net-adds decline sequentially.

Emerging markets, particularly rural areas in India and China, remain theprimary new subscriber growth vehicle. Subscribers in emerging markets

are expected to reach 3.69 billion in 2011, which would constitute

78.1% of total subscribers (vs. 70.5% in 2007).Mirroring the overall marke

we expect emerging market net adds to peak in 2007 with net-adds of 473.6M

1.13B handsets to ship in2007E and 1.28B in 2008E

Market growth of 14.6% in2007E and 13.7% in 2008E

Growth slowing but at amoderate rate see a 10.2%shipments CAGR through2011E

ASP still dropping, but not asurprise

Revenue growth a stepbehind unit growth, with a5.9% CAGR through 2011E

QCOMs WCDMA targetsconservative

4 billion subs around thecorner

Emerging markets morethan 78% of total subs in2011E


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Handset Industry Outlook

Handset ShipmentsWe present our worldwide mobile handset forecast by six regions: NorthAmerica, Latin America (including the Caribbean and Mexico), Western Europe,

Eastern Europe, Asia-Pacific, and the Middle East and Africa (MEA). We segmen

mobile handsets into emerging markets and mature markets:

Emerging marketsinclude Latin America, Eastern Europe, MEA, and

portions of Asia Pacific.

Mature marketsinclude North America, Western Europe, and the followincountries from Asia Pacific: Australia, Hong Kong, Japan, Korea, New

Zealand, and Taiwan.

While our 2007 worldwide handset forecast remains 1,130 million(up

14.6% YoY), were raising our2008 estimate to 1,284 million(up 13.7%YoY) from the prior 1,260 million. Were also updating our estimates for each o

the next three years with handset shipments reaching 1.67 billion in 2011

We project a healthy 2007-2011 handset shipment CAGR of 10.2%, with doubl

digit growth in 2007-2009 followed by moderating growth in 2010 and 2011.

The key factors in our forecast include continued new subscriber growth and a

consistently strong replacement market. The 10.2% 2007-2011 CAGR compareto the CAGR of 21.9% from 2003-2007, which benefited from a particularly

robust period of new subscriber additions in emerging markets.

Based on size and growth prospects, the strongest opportunity for handsetgrowth remains Asia Pacific.This region accounts for approximately 41.8%

of 2008E handset shipments and has a 2007-2011 CAGR of 13.9%. The growth

comes from a mix of mature markets with high replacement rates, such as

Japan and South Korea, and still emerging markets like India and Indonesia.

Exhibit 2.

Worldwide Mobile Handset Shipments

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2001 2002 2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(E)

ThousandsofUsers

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

'03-'07 CAGR

of 21.9%

'07-'11 CAGR

of 10.2%

Source: Company reports and CIBC World Markets Corp.

Raising our 2008 worldwideforecast to 1.28 billion units

CAGR dropping to 10.2% for07-11E from 21.9% in 03-07E


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Exhibit 3.

Total Handset Shipments by Region (Thousands of Un

2001 2002 2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(E) CAGR 03-07 CAGR 07-

North America 64,283 80,905 80,784 101,988 122,226 142,790 153,509 165,190 177,085 185,384 190,338 17.4% 5.

Latin America 33,734 31,938 45,234 75,860 94,216 106,596 119,149 131,935 142,261 150,135 157,505 27.4% 7.

West Europe 101,701 125,046 123,694 140,795 155,422 169,166 179,616 190,522 201,087 211,466 220,927 9.8% 5.

East Europe 24,591 34,700 48,782 68,047 76,542 105,238 115,192 125,675 134,926 143,534 152,784 24.0% 7.

Asia Pacific 135,953 148,488 174,598 218,570 268,181 355,707 443,101 536,952 622,351 684,950 746,787 26.2% 13.

MEA 23,199 26,644 38,947 58,235 93,686 106,200 119,105 133,942 153,555 172,411 197,984 32.2% 13.

Total 383,460 447,722 512,038 663,496 810,273 985,698 1,129,671 1,284,216 1,431,266 1,547,880 1,666,325 21.9% 10.2Growth -6.7% 16.8% 14.4% 29.6% 22.1% 21.7% 14.6% 13.7% 11.5% 8.1% 7.7%

Source: CIBC World Markets

Exhibit 4.

Total Handset Shipments by Region (% of Total Market)

2001 2002 2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(

North America 16.8% 18.1% 15.8% 15.4% 15.1% 14.5% 13.6% 12.9% 12.4% 12.0% 11.4

Latin America 8.8% 7.1% 8.8% 11.4% 11.6% 10.8% 10.5% 10.3% 9.9% 9.7% 9.5

West Europe 26.5% 27.9% 24.2% 21.2% 19.2% 17.2% 15.9% 14.8% 14.0% 13.7% 13.3

East Europe 6.4% 7.8% 9.5% 10.3% 9.4% 10.7% 10.2% 9.8% 9.4% 9.3% 9.2

Asia Pacific 35.5% 33.2% 34.1% 32.9% 33.1% 36.1% 39.2% 41.8% 43.5% 44.3% 44.8

MEA 6.0% 6.0% 7.6% 8.8% 11.6% 10.8% 10.5% 10.4% 10.7% 11.1% 11.9

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0Source: CIBC World Markets

China and India in particular provide a strong foundation. Even with all the

growth in China in the past several years, penetration is still a modest 40.3%and Indias is a much lower 20.5%. This suggests that robust new subscriber

additions to handset shipments are still viable and complemented by a growing

replacement market in both countries as well.

The other five regions are relatively well balanced in share of 2008E worldwide

shipments, with North America accounting for about 13%, Latin America 10%,

Western Europe 15%, Eastern Europe 10% and MEA 10%. Looking beyond2008 we expect Asia and MEA to grow as a percentage of total

shipments, with all of the other regions declining slightly.

Replacement RateAs weve already noted, it is increasingly difficult to find new subscribers in themature wireless markets and many emerging market countries are seeing

growth rates moderate. As a result, the largest force in future handset shipmengrowth is replacement handset purchases by current subscribers. Of the 1.28

billion handsets we expect to ship in 2008, 814.7 million, or 63.4%, are

replacement purchases. We expect the gap between new and replacemen

shipments to continue to widen, with 79.2% of handset shipments in

2011 being replacements.

We also see the rate of replacement purchases increasing. We calculatereplacement rate based on the total number of replacement handsets shipped

any given year versus the total number of mobile subscribers in the prior year.

Based on this definition, we expect the 2008 replacement rate to be

26.0%,up from 23.1% in 2007. Further out, we expect the replacement rate

slowly increase, with the market reaching 30.1% in 2011.

China and India are thefoundation

79.2% of handset shipmentsin 2011E are replacements

Replacement rate to reach30.1% in 2011E


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Exhibit 5.

Replacement Handset Shipments by Region (Thousands of Un

2001 2002 2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(E) CAGR 03-07 CAGR 07-

North America 42,939 68,038 61,609 78,939 91,638 113,511 132,944 151,967 167,524 178,560 184,017 21.2% 8.

Latin America 12,486 16,156 20,900 27,518 25,486 38,000 53,716 80,403 107,804 125,722 134,898 26.6% 25.

West Europe 62,857 106,381 97,230 110,768 121,348 131,261 154,342 171,069 186,487 200,749 211,139 12.2% 8.

East Europe 2,948 9,106 15,509 22,520 45,916 58,136 80,359 98,203 1 12,164 123,491 1 33,548 50.9% 13.

Asia Pacific 38,989 44,769 66,779 92,990 120,029 128,159 149,291 262,318 370,810 450,076 526,297 22.3% 37.

MEA 4,870 6,341 10,863 15,523 18,787 15,925 29,801 50,718 75,456 99,169 129,785 28.7% 44.

Total 165,089 250,792 272,889 348,258 423,204 484,992 600,453 814,677 1,020,244 1,177,767 1,319,683 21.8% 21.8Growth 0.6% 51.9% 8.8% 27.6% 21.5% 14.6% 23.8% 35.7% 25.2% 15.4% 12.0%


Exhibit 6.

Handset Replacement Rate By Region

2001 2002 2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(

North America 36.7% 49.2% 40.8% 46.3% 47.4% 50.7% 53.0% 56.0% 58.9% 60.7% 61.2

Latin America 19.7% 19.1% 20.8% 22.1% 14.7% 15.7% 17.4% 21.5% 25.3% 27.3% 27.8

West Europe 25.8% 37.6% 32.3% 33.8% 33.9% 33.5% 36.1% 37.8% 39.5% 41.2% 42.4

East Europe 10.6% 18.4% 20.7% 20.8% 28.6% 28.5% 32.2% 34.6% 36.0% 36.9% 37.7

Asia Pacific 16.8% 13.6% 15.4% 17.2% 18.0% 15.7% 14.4% 19.7% 23.1% 24.2% 25.1

MEA 11.8% 10.6% 13.6% 14.4% 12.5% 7.1% 9.1% 12.2% 15.1% 17.2% 20.0

Total 22.7% 26.6% 23.9% 25.2% 24.9% 23.1% 23.1% 26.0% 28.3% 29.4% 30.1Source: CIBC World Markets

Factors we see contributing to a higher replacement rate include:

New features- New functionality at lower prices remains an important

catalyst prompting many users to upgrade their current handsets. Features

we consider particularly important include 2-5 megapixel cameras,

MP3/music players, video/mobile TV players, and WLAN. We also note atrend toward touch screen devices (facilitating mobile email, web browsing

and other data intensive applications) and GPS/location based services. GP

isnt new, but with Nokias pending acquisition of NAVTEQ and new visibilitycoming from Googles Android platform, we are bullish on GPS seeing

broader support and improved capability.

Accessorizing- Handsets have become fashion accessories for some andas styles change many choose to upgrade. Contributing factors here includ

improved form factors (thin, slide, click), other style changes (color

variations, lighting effects), and fashion branding (such as Prada (LG) and

Armani (Samsung)).

Emerging markets As penetration rates increase in emerging markets,

user sophistication has also increased. As a result, we see a rampingreplacement opportunity in emerging markets as users replicate the buyer

behavior we take for granted in mature markets. This is alreadycontributing, but should accelerate in the later years of our forecast.

Industry RevenueWhile we are still positive on handset shipments growth through 2011, we

expect declining ASPs to produce lower revenue growth for the handsetindustry as a whole. We believe investors will have to pay more attention to

this point, which we consider a better tool than pure handset unit share

ASP erosion would make forlower revenue growth


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gains/losses to evaluate the prospects of the individual OEMs. Therefore, we

have shifted our analysis to focus on these points.

We expect revenue from handset sales into the channel to top $136.6

billion in 2007, up 6.1% from the $128.8 billion in 2006. In 2008, we expesales to be $150.1 billion, which reflects a 9.8% annual increase and

more modest price pressure given supply constraints entering the year and an

expansion of the high-end market. By 2011, we project total market revenue t

reach $172.2 billion, or a 2007-2011 CAGR of 5.9%. This modest growthoutlook is in contrast to a much stronger 2003-2007 CAGR of 13.2%, which

included several years of much stronger unit volume growth, particularly in 200

(+29.6%), 2005 (+22.1%) and 2006 (+21.7%).

Our 2007 market revenue estimate assumes a worldwide ASP of $121.Our checks show that the highest ASP is in West Europe at $173 and the lowesis in Latin America at $82 (Asia has the very high highs (Japan and Korea) and

lows (India and China)). As vendors push further into emerging markets and tr

to spur replacement purchases, regional ASPs should show a steady decline ovthe next several years with a worldwide ASP of $103 in 2011, which include

a regional high of $155 and a low of $70.

Built into our declining ASP assumptions is continued strong volume growth in

emerging markets, which puts pressure on ASP as mix shifts down toward morlow- and mid-tier handsets. We also anticipate that price floors for each price

tier will slip some. In general, higher-end functionality (3G HSPA, 5MP

cameras) is coming at lower and lower prices as volumes rise.

Factors moderating price pressure and the reason we see a relatively modestpricing environment overall relative to last few years include (1) a growing

contribution from 3G, (2) exploding smart phone market, and (3) a strong

replacement cycle in the low end of the market, which tends to make for highe

ASPs (i.e., the first $40 handset purchased will be replaced with a $60 handset

We note that more aggressive ASP declines would likely be positive for unitvolumes and produce further penetration in emerging markets, accelerating (o

at least supporting) handset replacement. Thus, if our ASP assumptions are toooptimistic, our revenue estimates could still be about right (units higher as ASP

are lower).

Exhibit 7.

Total Handset Revenue by Region (Millions of

2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(E) CAGR 03-07 CAGR 07-

North America $15,107 $17,542 $18,456 $21,133 $22,259 $23,292 $24,261 $24,656 $24,934 10.2% 2.9

Latin America 4,795 7,586 8,762 9,274 9,770 10,423 10,812 10,660 11,025 19.5% 3.1

West Europe 24,739 27,596 29,530 30,619 31,074 32,960 33,582 34,046 34,244 5.9% 2.5

East Europe 5,171 7,009 7,578 9,787 10,022 10,557 11,064 10,909 11,000 18.0% 2.4

Asia Pacific 28,285 33,004 38,618 46,598 51,843 60,139 66,592 69,865 73,932 16.4% 9.3

MEA 5,063 7,338 11,242 11,363 11,672 12,724 14,281 15,517 17,027 23.2% 9.9

Total Revenue $83,159 $100,074 $114,186 $128,774 $136,639 $150,095 $160,590 $165,652 $172,162 13.2% 5.9

Revenue Growth 20.3% 14.1% 12.8% 6.1% 9.8% 7.0% 3.2% 3.9%


Handset sales of $136.6B in2007E growing to $172.2B in2011E

Worldwide handset ASP of$121 in 2007E, falling to$103 in 2011E

More aggressive pricedeclines could drive unit

shipments


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Exhibit 8.

Total Handset Revenue by Region - % Contribution

2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(E)

North America 18.2% 17.5% 16.2% 16.4% 16.3% 15.5% 15.1% 14.9% 14.5%

Latin America 5.8% 7.6% 7.7% 7.2% 7.2% 6.9% 6.7% 6.4% 6.4%

West Europe 29.7% 27.6% 25.9% 23.8% 22.7% 22.0% 20.9% 20.6% 19.9%

East Europe 6.2% 7.0% 6.6% 7.6% 7.3% 7.0% 6.9% 6.6% 6.4%

Asia Pacific 34.0% 33.0% 33.8% 36.2% 37.9% 40.1% 41.5% 42.2% 42.9%MEA 6.1% 7.3% 9.8% 8.8% 8.5% 8.5% 8.9% 9.4% 9.9%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%


Exhibit 9.

Handset ASP by Region

2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(E) CAGR 03-07 CAGR 07-

North America $187 $172 $151 $148 $145 $141 $137 $133 $131 -6.2% -2.5

Latin America 106 100 93 87 82 79 76 71 70 -6.2% -3.9

West Europe 200 196 190 181 173 173 167 161 155 -3.6% -2.7

East Europe 106 103 99 93 87 84 82 76 72 -4.8% -4.6

Asia Pacific 162 151 144 131 117 112 107 102 99 -7.8% -4.1

MEA 130 126 120 107 98 95 93 90 86 -6.8% -3.2Total $162 $151 $141 $131 $121 $117 $112 $107 $103 -7.1% -3.9

ASP Growth -7.1% -6.6% -7.3% -7.4% -3.4% -4.0% -4.6% -3.5%


Exhibit 10.

Handset Shipment, ASP and Revenue Growth

29.6%

22.1%

14.6%

21.7%

13.7%

11.5% 8.1% 7.7%

-7.1% -6.6% -7.3% -7.4%

-3.5%-4.6%-4.0%-3.4%

6.1%

12.8%

20.3%

14.1%

9.8%

7.0%

3.2%3.9%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(E)

Shipment Growth ASP Growth Revenue Growth

Source: CIBC World Markets Corp.


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Handset OEM Trends

Market Share TrendsShifting our analysis from industry metrics to vendor specifics, what was a twohorse race in 2006 between Nokia and Motorola has seen Motorola fall back

the pack in 2007. In 4Q06, Motorola had increased its market share to 23.8%

a considerable lead above No. 3 Samsungs 11.9%. While still a distance fromNokias 38.2%, it was close enough to consider Motorola a head-to-head

competitor in nearly all aspects.

A year later, Nokias dominance is once again unquestioned, holding aprojected 38.5% share for 2007 (based on our estimates). This is up from its

35.3% in 2006 and more than the 37.7% share of its three closest competitorscombined. Nokia is the only vendor at this point committed to the global marke

in all segments, from the ultra low end to the $1,000+ price point.

Conversely, Motorola, with its challenging financial performance, has pulledaway from chasing share at the expense of profitability. This has largely taken

the company out of the very low end for now and led to significant share losses

in emerging regions. We expect Motorola to re-enter these regions in the futurbut believe it would take time.

Samsung (14.5%) and Motorola (14.0%) have very similar market sharesfo2007, with Samsung making a late year push to put it a small number of units

ahead of Motorola. We expect Motorola and Samsung to slug it out in late 2008and still believe that despite Samsungs solid presence in the U.S. and 3G and

its growing focus on the low end, Motorola will eventually regain the No. 2

spot. A stronger brand name and distribution channel are elements that shoul

push Motorola forward once its product portfolio is revamped (2H08).

Adding No. 4 Sony Ericsson (9.3%) and No. 5 LG (7.2%) into the mix brings thcombined share for the top five vendors to 83.3% of the worldwide mobile

handset market. We believe both Sony Ericsson and LG are at a trickycrossroad. They have managed to show solid market share and margin

improvements in 2007. Yet, if Motorola bounces back, we find it difficult to

see how they can keep up without some material missteps. Also, both ataking steps to move into the low end of the market where scale is key for

survival. Both are sizable, but at a disadvantage to the top three OEMs.

Although we look for the top five to gain incremental share from tier 2 and 3

vendors in 2008, further out share gains will increasingly have to come from

within the top five. Outside of the top five OEMs, we are seeing share

being consolidated as well. Vendors like HTC and RIMM are gaining in thehigh end and Lenovo, ZTE and Huawei in the low end. These vendors deserve

more attention and can challenge the top five in certain regions or ASP tiers.

With regards to RIM, we see the company continuing to benefit from its

strong enterprise traction and the long-term shift toward smart phone

The company has also successfully migrated from a sole focus on the enterpris

to the consumer market. With a new load of products targeted for 2008, itremains to be seen how low it would go in driving its growth. That said, RIM

has clearly found a defensible position, which it is strongly leveraging. We see

more gains for RIM for the foreseeable future.

Nokia stands alone, asMotorola falters

Nokia is king of the hill

Still believe that Motorolawill eventually regain the No.2 spot

Sony Ericsson and LG are ata tricky crossroad

Dont overlook the others

RIM picking up momentum


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Exhibit 11.

Vendor Handset Shipments (Thousands of Un

2006A 1Q07A 2Q07A 3Q07A 4Q07E 2007E 1Q08E 2Q08E 3Q08E 4Q08E 2008E

Nokia 347,500 91,100 100,800 111,700 131,000 434,600 112,000 118,000 125,000 145,000 500,0

QoQ Growth -13.6% 10.6% 10.8% 17.3% -14.5% 5.4% 5.9% 16.0%

YoY Growth 31.0% 21.3% 28.6% 26.2% 24.2% 25.1% 22.9% 17.1% 11.9% 10.7% 15.0

Motorola 217,400 45,400 35,500 37,200 39,800 157,900 33,000 35,000 39,000 46,000 153,0

QoQ Growth -30.9% -21.8% 4.8% 7.0% -17.1% 6.1% 11.4% 17.9%

YoY Growth 48.9% -1.5% -31.6% -30.7% -39.4% -27.4% -27.3% -1.4% 4.8% 15.6% -3.1

Samsung 118,900 34,800 37,400 42,600 48,500 163,300 49,470 49,965 51,963 53,522 204,9

QoQ Growth 5.8% 7.5% 13.9% 13.8% 2.0% 1.0% 4.0% 3.0%

YoY Growth 15.5% 20.0% 42.2% 38.8% 47.4% 37.3% 42.2% 33.6% 22.0% 10.4% 25.5

Sony Ericsson 74,800 21,800 24,900 25,900 32,000 104,600 27,000 28,500 30,000 35,500 121,0

QoQ Growth -16.2% 14.2% 4.0% 23.6% -15.6% 5.6% 5.3% 18.3%

YoY Growth 46.4% 63.9% 58.6% 30.8% 23.1% 39.8% 23.9% 14.5% 15.8% 10.9% 15.7

LG 63,600 15,800 19,100 21,900 24,309 81,109 23,094 23,786 24,738 25,975 97,5

QoQ Growth -11.7% 20.9% 14.7% 11.0% -5.0% 3.0% 4.0% 5.0%

YoY Growth 15.8% 12.1% 27.3% 31.9% 35.8% 27.5% 46.2% 24.5% 13.0% 6.9% 20.3

RIM 5,503 2,029 2,416 3,056 3,900 11,401 4,375 4,813 5,294 5,824 20,3

QoQ Growth 11.9% 19.1% 26.5% 27.6% 12.2% 10.0% 10.0% 10.0%

YoY Growth 52.6% 81.5% 99.5% 124.7% 115.0% 107.2% 115.6% 99.2% 73.2% 49.3% 78.1

Other Vendors 157,297 37,071 41,884 47,644 50,491 177,090 46,061 46,936 50,005 44,179 187,1QoQ Growth 41.6% 13.0% 13.8% 6.0% -8.8% 1.9% 6.5% -11.7%

YoY Growth -15.6% -12.3% -13.6% 18.1% 92.8% 12.6% 24.3% 12.1% 5.0% -12.5% 5.7

Total Shipments 985,000 248,000 262,000 290,000 330,000 1,130,000 295,000 307,000 326,000 356,000 1,284,0

QoQ Growth -10.1% 5.6% 10.7% 13.8% -10.6% 4.1% 6.2% 9.2%

YoY Growth 21.6% 12.2% 10.5% 15.5% 19.6% 14.7% 19.0% 17.2% 12.4% 7.9% 13.6

Source: CIBC World Markets., Company Reports

Note: Research In Motion (RIM) results are shifted by one month with the company's fiscal year end being February.

Exhibit 12.

Vendor Handset Market Share

2006A 1Q07A 2Q07A 3Q07A 4Q07E 2007E 1Q08E 2Q08E 3Q08E 4Q08E 2008E

Nokia 35.3% 36.7% 38.5% 38.5% 39.7% 38.5% 38.0% 38.4% 38.3% 40.7% 38.9

Delta QoQ -1.5% 1.7% 0.0% 1.2% -1.7% 0.5% -0.1% 2.4%

Delta YoY 2.5% 2.8% 5.4% 3.3% 1.5% 3.2% 1.2% 0.0% -0.2% 1.0% 0.5

Motorola 22.1% 18.3% 13.5% 12.8% 12.1% 14.0% 11.2% 11.4% 12.0% 12.9% 11.9

Delta QoQ -5.5% -4.8% -0.7% -0.8% -0.9% 0.2% 0.6% 1.0%

Delta YoY 4.0% -2.6% -8.3% -8.6% -11.7% -8.1% -7.1% -2.1% -0.9% 0.9% -2.1

Samsung 12.1% 14.0% 14.3% 14.7% 14.7% 14.5% 16.8% 16.3% 15.9% 15.0% 16.0

Delta QoQ 2.1% 0.2% 0.4% 0.0% 2.1% -0.5% -0.3% -0.9%

Delta YoY -0.6% 0.9% 3.2% 2.5% 2.8% 2.4% 2.7% 2.0% 1.3% 0.3% 1.5

Sony Ericsson 7.6% 8.8% 9.5% 8.9% 9.7% 9.3% 9.2% 9.3% 9.2% 10.0% 9.4

Delta QoQ -0.6% 0.7% -0.6% 0.8% -0.5% 0.1% -0.1% 0.8%

Delta YoY 1.3% 2.8% 2.9% 1.0% 0.3% 1.7% 0.4% -0.2% 0.3% 0.3% 0.2

LG 6.5% 6.4% 7.3% 7.6% 7.4% 7.2% 7.8% 7.7% 7.6% 7.3% 7.6

Delta QoQ -0.1% 0.9% 0.3% -0.2% 0.5% -0.1% -0.2% -0.3%

Delta YoY -0.3% 0.0% 1.0% 0.9% 0.9% 0.7% 1.5% 0.5% 0.0% -0.1% 0.4

RIM 0.6% 0.8% 0.9% 1.1% 1.2% 1.0% 1.5% 1.6% 1.6% 1.6% 1.6Delta QoQ 0.2% 0.1% 0.1% 0.1% 0.3% 0.1% 0.1% 0.0%

Delta YoY 0.1% 0.3% 0.4% 0.5% 0.5% 0.5% 0.7% 0.6% 0.6% 0.5% 0.6

Other Vendors 16.0% 14.9% 16.0% 16.4% 15.3% 15.7% 15.6% 15.3% 15.3% 12.4% 14.6

Delta QoQ 5.5% 1.0% 0.4% -1.1% 0.3% -0.3% 0.1% -2.9%

Delta YoY -7.0% -4.2% -4.5% 0.4% 5.8% -0.3% 0.7% -0.7% -1.1% -2.9% -1.1

Total Shipments 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0

Source: CIBC World Markets., Company Reports

Note: Research In Motion (RIM) results are shifted by one month with the company's fiscal year end being February.


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Exhibit 13.

2007(E) and 2006 Handset Vendor Regional Market Share

North America Latin America Western Europe MEA/East Europe Asia Pacific Worldwide

2006 2007(E) Change 2006 2007(E) Change 2006 2007(E) Change 2006 2007(E) Change 2006 2007(E) Change 2006 2007(E) Chan

Nokia 14% 8% -6% 32% 31% -1% 36% 39% 3% 44% 54% 10% 40% 43% 3% 35% 39% 3%

Motorola 39% 36% -3% 31% 28% -3% 17% 12% -5% 17% 7% -10% 18% 7% -11% 22% 14% -8%

Samsung 17% 19% 2% 6% 8% 2% 15% 18% 3% 13% 13% 0% 10% 14% 4% 12% 15% 2%

Sony Ericsson 3% 1% -2% 8% 13% 5% 12% 16% 4% 9% 12% 3% 6% 7% 1% 8% 9% 2%

LG 15% 16% 1% 8% 12% 4% 4% 5% 1% 3% 4% 1% 6% 6% -1% 7% 7% 1%

Other 12% 20% 8% 15% 8% -7% 16% 10% -6% 14% 10% -4% 20% 24% 4% 16% 17% 0%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Source: Gartner Dataquest and CIBC World Markets

Financial TrendsBefore we examine each of the leading handset vendors, we briefly address the

financial trends in the handset market and the associated opportunity for

handset vendors. As we examine handset sales and shipments by vendor, itbecomes clear that handsetmarket share does not necessarily correlate

closely with revenue share or profit share.

A good example is Nokia, which based on our 2007 estimates accounts for38.5% of handset shipments, 36.2% of handset revenue, and an impressive

59.8% of industry operating income. Conversely, Motorola accounts for 14.0%

of shipments and 13.0% of revenue, but is currently running at an unprofitable

operating level (a 4.0% operating margin).

Exhibit 14.

2007(E) Vendor Share of Key Metrics

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Nokia Motorola Samsung LG Sony

Ericsson

RIM Other

Unit Volume Revenue Operating Income

2009(E) Handset Vendor Share of Key Metrics

0%

10%

20%

30%

40%

50%

60%

70%

Nokia Motorola S amsung LG Sony

Ericsson

RIM Other

Unit Volume Revenue Operating Income


Note: Operating income percent contribution in 2007 not normalized to 100% - allowing Motorolas expected negative operating income for 2007 to be reflected as a negative percentage.

Shipments not necessarily agood indicator of profits

Nokia has the lions shareand most at stake


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Exhibit 17.

Operating Income / Handset Shipment Share Ratio

-0.5

0.0

0.5

1.0

1.5

2.0

2003 2004 2005 2006 2007(E) 2008(E) 2009(E)

Nokia Motorola Samsung Sony Ericsson LG


Using this ratio, we can see that RIM generates by far the most operatingincome share per handset shipment, with an estimated 2007 ratio of 6.52

vs. the group average of 1.61. Excluding RIM, which clearly is an outlier, we se

that Nokia is the next strongest at 1.55 vs. a group average of 0.79. LG (1.33)

also fares well based on this metric, which we believe reflects its heavy exposu

to the CDMA market, as does Samsung (1.25). Sony Ericsson (0.77) is roughlyin line with the group average (although below if we exclude Motorola), while

Motorola with its 0.29 is gaining the least from its market position.

While struggling at the moment, Motorola has the most attractiveopportunity to turn its business aroundover the next two years, in our

opinion. We see 2008 unfolding for Motorola much like 2007, but by 2009 we

expect the company to be back on its feet with an improved product portfolioand the potential to show both improvement in handset market share (with a

focus on the mid and high tiers) and industry profits share (as margins start to

recover). As this occurs, we see its contribution ratio improving to 0.48 in

2009, just a bit short of the group average of 0.76. In this respect (share gainin units and profits), we see considerable value in MOT, as its current

position understates this potential.

As Motorola regains its footing in the next two years, we expect Nokia and allthe other top vendors to see compression in this ratio(effectively gaining

a smaller share of profits). Nokia, which has gained the most from Motorolastroubles, may have the most to lose as it recovers; however, Samsung, Sony

Ericsson and LG are more dependent on the markets Motorola is directly

targeting (based on a percentage contribution basis) and are at risk as well.

Building on this discussion, Exhibit 18 highlights our impression of the near- tomoderate-term prospects for the leading handset vendors. The exhibit gives asense of how well positioned the companies are to gain handset market share,

increase sales and generate operating profit versus the competition. We show

Motorola as the only OEM we expect to show gains on all fronts.

RIM gets a lot (of profit) froma little (shipments)

Motorola turning thingsaround

Everyone giving someground as Motorola recovers


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Exhibit 19.

Total Handset Revenue by Vendor (Millions of

2003 2004 2005 2006 2007(E) 2008(E) 2009(

Nokia $27,767 $28,702 $34,179 $41,916 $49,505 $55,115 $58,9

Motorola 10,978 17,108 21,455 28,383 17,759 16,621 23,5

Samsung 10,812 15,836 17,604 18,271 24,488 28,311 28,5

LG 4,338 7,522 8,366 9,677 11,202 11,624 11,1

Sony Ericsson 5,476 7,703 9,112 13,821 17,496 18,956 19,3RIM 187 629 1,185 1,927 3,918 7,030 9,3

Other 23,601 22,575 22,285 14,779 12,270 12,438 9,7

Total $83,159 $100,074 $114,186 $128,774 $136,639 $150,095 $160,5

Growth 20.3% 14.1% 12.8% 6.1% 9.8% 7.0

Source: Company Data, CIBC World Markets

Exhibit 20.

Total Handset Revenue by Vendor - Market Share

2003 2004 2005 2006 2007(E) 2008(E) 2009(

Nokia 33.4% 28.7% 29.9% 32.5% 36.2% 36.7% 36.7

Motorola 13.2% 17.1% 18.8% 22.0% 13.0% 11.1% 14.7

Samsung 13.0% 15.8% 15.4% 14.2% 17.9% 18.9% 17.8

LG 5.2% 7.5% 7.3% 7.5% 8.2% 7.7% 6.9Sony Ericsson 6.6% 7.7% 8.0% 10.7% 12.8% 12.6% 12.0

RIM 0.2% 0.6% 1.0% 1.5% 2.9% 4.7% 5.8

Other 28.4% 22.6% 19.5% 11.5% 9.0% 8.3% 6.1

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0


Exhibit 21.

Handset ASP by Vendor

2003 2004 2005 2006 2007(E) 2008(E) 2009(

Nokia $154 $138 $129 $121 $114 $110 $1

Motorola 147 164 147 131 112 109 1

Samsung 194 183 171 154 150 138 1

LG 158 169 152 152 138 119 1

Sony Ericsson 201 181 178 185 167 157 1

RIM 296 299 329 350 344 346 3

Other 161 128 119 94 69 66

Total $162 $151 $141 $131 $121 $117 $1

Growth -7.1% -6.6% -7.3% -7.4% -3.4% -4.0


Exhibit 22.

Handset Operating Income by Vendor (Millions of

2003 2004 2005 2006 2007(E) 2008(E) 2009(

Nokia $6,604 $4,714 $5,303 $6,590 $10,131 $11,496 $12,1

Motorola 479 1,728 2,183 2,689 -678 134 1,5

Samsung 2,037 2,462 2,267 1,846 3,054 3,305 3,2LG 159 475 383 80 933 1,006 1,0

Sony Ericsson -134 580 487 1,591 2,080 2,264 2,3

RIM 11 207 418 533 1,116 2,137 2,8

Other 1,369 1,293 1,250 929 315 616 8

Total $10,524 $11,460 $12,291 $14,258 $16,951 $20,958 $24,0

Growth 8.9% 7.3% 16.0% 18.9% 23.6% 14.8



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Exhibit 23.

Handset Operating Margin by Vendor

2003 2004 2005 2006 2007(E) 2008(E) 2009(

Nokia 23.8% 16.4% 15.5% 15.7% 20.5% 20.9% 20.6

Motorola 4.4% 10.1% 10.2% 9.5% -3.8% 0.8% 6.6

Samsung 18.8% 15.6% 12.9% 10.1% 12.5% 11.7% 11.3

LG 3.7% 6.3% 4.6% 0.8% 8.3% 8.7% 9.8

Sony Ericsson -2.4% 7.5% 5.3% 11.5% 11.9% 11.9% 12.0

RIM 5.7% 33.0% 35.3% 27.6% 28.5% 30.4% 30.7

Other 5.8% 5.7% 5.6% 6.3% 2.6% 5.0% 8.8

Total 12.7% 11.5% 10.8% 11.1% 12.4% 14.0% 15.0


Exhibit 24.

Handset Operating Income by Vendor - % Contribution

2003 2004 2005 2006 2007(E) 2008(E) 2009(

Nokia 62.7% 41.1% 43.1% 46.2% 59.8% 54.9% 50.4

Motorola 4.6% 15.1% 17.8% 18.9% -4.0% 0.6% 6.4

Samsung 19.4% 21.5% 18.4% 12.9% 18.0% 15.8% 13.4

LG 1.5% 4.1% 3.1% 0.6% 5.5% 4.8% 4.6

Sony Ericsson -1.3% 5.1% 4.0% 11.2% 12.3% 10.8% 9.7

RIM 0.1% 1.8% 3.4% 3.7% 6.6% 10.2% 11.9

Other 13.0% 11.3% 10.2% 6.5% 1.9% 2.9% 3.6

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0


NokiaNokia remains the worlds No. 1 vendor of mobile handsets by a wide

margin, surviving Motorolas 2006 market share push without missing a step.

Samsung has overtaken Motorola by a slight margin to claim the No. 2 spot, bu

it is in no position to push Nokia out of the No. 1 spot.

Nokia continues to execute well and with a refreshed and competitive portfolio,

there is probably nothing on the horizon to endanger its strong market position

The company continues to enjoy the top spot in the biggest markets (India andChina) and is the only manufacturer committed to emerging markets as

whole. As a result, Nokia is seeing a mix shift toward lower-tier lower-priced

phones, but its financial performance hasnt sufferedgiven a portfolio fille

with newer, more cost-efficient platforms.

The lack of a focus on CDMA continues to put Nokia at a disadvantage in NorthAmerica, but with global growth opportunities for GSM very strong, we dont sethis as too much of a concern. We believe the company would make a stronger

push on this front in 2008 as it ramps its ODM CDMA relationships.

At the moment, demand has outstripped supply, which could limit Nokias

ability to experience near-term upside. However, with the industry seeing

component shortages across the supply chain, we believe Nokia is still first inline to get its fair (and very large) share.

Nokia continues to have the most comprehensive and competitive handseportfolio top to bottom, a testament to the companys scale advantage. Nok

has closed the gap on form factor and fashion (particularly on the thin side) anremains committed to designs that incorporate mass marketready functionalit

We dont see any big weak spots in the catalog, acknowledging CDMA isnt astrength or focus area. Within the GSM and WCDMA portfolio, we give the

The right mix in the rightplaces

North America still a weakspot

Demand outstripping supply


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company high marks on its candy bar handsets, but it has improved the flip

phone and slider line-up as well.

We see no competitor that is currently in a good position to gain

meaningful share against Nokia in the low end, especially for ultra low-cohandsets. Near-term volume drivers are the Nokia 1600 and the older 1100. B

the company has already embraced lower-cost single chip designs, with the

1200 and 1208 now ramping. These phones should become more important in

2008 from a volume perspective and help with margins. Longer term Nokiasmargins could come under pressure from the mix shift (toward the low end) an

entry of some OEMs into the market, but in the near term we believe Nokia can

continue to push the low-end pedal without fear.

In the mid/high end Nokia faces more competition, but its deep GSMportfolio and strong brand keep the company very competitive. The 6000 seriephones, such as the 6300 and 6500, dominate Nokias mid-tier offerings while

the company has expanded into the music space with its XpressMusic handsets

such as the 5310 showing positive traction. We also expect the Barracuda and

Luna to contribute as Nokia looks to extend its reach in the marketplace.

The higher-end N-Series has been a successwith over 9 million shipped in3Q07. The refreshed N-series has been particularly well received in Europe, wit

new iterations of the N95 and new handsets such as the N81 and N82 expectedto ramp in 2008.

Competition is much tougher in the mid/high end than in the low end, whereNokias scale advantage comes into play. Samsung, Sony Ericsson and LG allhave solid portfolios and Motorolas portfolio is slowly improving. Apple, with th

iPhone, and Research In Motion, with the Curve and Pearl, are also keeping the

pressure on in the high-end consumer-focused smart phone segment.

The enterprise market remains a focusfor Nokia, although disappointing tofinancial performance. The long-term opportunity makes it worth the effort, in

our opinion. The E61 (with Qwerty keyboard) and E65 are the key drivers in thsegment yet not really gaining much traction against a strong Blackberry line-u

as true email devices. Shipments of Nokias E-series have started to gain sometraction, mostly in Western Europe, but we believe there is still much to be don

here to be competitive with RIM.

Nokia is by far the dominant force in WCDMA in Europe, led by the popularN-series portfolio and the value-oriented 6000 series. Although competition

continues to target Nokia directly, only Sony Ericsson has had much success in

Europe. Outside Europe, Nokias 3G position is less impressive. Nokia did

get into AT&Ts 3G portfolio in 2007, but it has yet to see the ramp we had

looked for. T-Mobile remains a solid customer for GSM that could help on 3G in

the U.S.

Low-cost phones drivingunit shipments

The mid- and high-endmarkets are competitive

Competition tougher in themid/high end

Enterprise still developing

A force in 3G WCDMA


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management team. While Motorola is essentially tied with Samsung for the

No. 2 market spot in 2007, Samsung has more momentum ending the year.

With that said, we believe Motorola is showing signs of progress. Handse

shipments in 3Q07 were stronger than expected in several markets and we loofor the momentum to build in 2008 even as Motorola manages component

shortages and excess inventory in the U.S. The current major portfolio overha

should put the company on better ground in 2H08 and 2009.

Motorolas goal is to deliver a well-stocked and diversified portfolio across four

key segments: mass market, feature phone, multimedia, and productivity. The

key area for improvement in our opinion is 3G WCDMA, where we have yto see a handset we consider a game changer. We also believe the company ha

a poor showing in productivity,as it misses the target with a weak Q

portfolio in comparison to strong competition, particularly from market leaderRIM. We dont look for the company to jump back into the very low end, with

the emphasis instead on sustainable profitability and solving customer needs.

From a regional perspective, Motorola still has a strong position in the U.S.leveraging a well-established brand name and solid position in CDMA EV-DO at

both Verizon and Sprint. Latin America also remains a relatively strong

area, but the rest of the world has come under considerable pressure. 2007

market share losses were significant in Europe (no 3G), MEA and Asia (given thmove away from the low end).

The RAZR brand has moved on to the RAZR2, a sleeker, improved version of thRAZR. Although it is a solid handset, demand for the RAZR2 has been

mixed. Based on our checks, the units shipped in 3Q07 have sold through, yet

the targets for 4Q07 seem too high. As a result, we expect Motorola will lower

the price of the RAZR2 in order to kick-start shipments in 2008.

On product introductions, we havent seen much yet and dont anticipate a lot activity in 1H08. We expect the majority of Motorolas new models that could

make a difference to ship in 2H08 and 2009. Motorola has downplayed the onehit wonder approach, so we dont look for another RAZR, just a solid and deepe

portfolio.

Of the phones that Motorola has already introduced, the U9 is a stylish music

phone that holds some promise. The ROKR E8 (Elba) is also interesting given itinnovative touch pad that would light certain keys depending upon the feature

being used by the user.

With Motorola unwilling to sacrifice profitability for market share, managementhas deemphasized the low end. As a result, the company has left the ultra-

low end for Nokia and positioned a refreshed W-series portfolio at higher low-end price points. This should lead to a more stable ASP environment for the

company in 2008 and 2009 and most likely an ASP increase as the mid- and

high-end portfolio improves.

Motorola continues to look at the enterprise and mobile email marketsas agrowth opportunity. Similar to Nokia, Motorola has had limited success. ThQ has been a solid device, but it is viewed primarily as a consumer product in a

very competitive smart phone space and not as an enterprise device. Regardle

of segment, the Q has not seen much traction in either category. The recent Qis a step up, but we still dont see it as a serious challenger to the entrenched

RIM Blackberry portfolio. There have been discussions about using HTC or

Compal for such devices in the future to broaden the portfolio.

Needs to close the gap in 3GWCDMA

U.S. a safe haven

What will come in 2008?

Deemphasizing the low end

Q phone not gaining tractionin enterprise


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Exhibit 27.

Motorola Handset Overview

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

1Q04A

2Q04A

3Q04A

4Q04A

1Q05A

2Q05A

3Q05A

4Q05A

1Q06A

2Q06A

3Q06A

4Q06A

1Q07A

2Q07A

3Q07A

4Q07E

1Q08E

2Q08E

3Q08E

4Q08E

HandsetShipments(Thousands)

0%

5%

10%

15%

20%

25%

HandsetMarketShare

Shipments Market Share


Exhibit 28.

Sampling of Motorola Phones

W156 W206 MOTO U9 RIZR Z9 Q9m RAZR2 V9

GSM GSM EDGE HSDPA EV-DO HSDPA


SamsungWith Motorola slipping, Samsung has climbed back into the No. 2 marketshare spot, a considerable distance behind Nokia and ahead of Motorola by avery slight margin. Recent momentum and a bit more focus on the low end

(>$50) than in the past clearly favor Samsung, which could help the company

distance itself from Motorola in 2008 at the No. 2 spot.

No. 2 reclaimed


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Longer term, its difficult to judge whether Samsung can separate itself from th

pack and establish itself as a clear No. 2. The companys selective approach

the low end canprovide spurts of upside, but it isnt the type of aggressivecommitment that would give the company a true edge over others (namely So

Ericsson and LG) doing the same.

Where we are the most bullish on Samsung is in Western Europe, wherethe company can maintain a solid business focused on mid- and high-tier

handsets and with 3G, and in North America, where it can leverage an edgeCDMA. While attractive markets, these two areas dont provide the volume

opportunity that emerging markets do, by our analysis.

Samsungs key models include the Ultra Edition II handsets, which shipped 5.7million units in 3Q07, and the E250, which is expected to meaningfully

contribute during 4Q07 and 2008. Also in the mix for 2008 are cross-brandinitiatives with Armani (following in LGs Prada footsteps) and Seranata (with

Bang & Olufsen). Samsung is also looking to take advantage of the touch scree

rage with such handsets as the Croix (HSDPA, 5MP camera), SGH-700V (HSDP

3.2MP camera) and Armani phone (Wi-Fi, 3MP camera).

3G WCDMA has been mixedfor the company, with the 5.5 million shipped in3Q07 a solid contributor, but still leaving ample room to grow. Overall, we see

Samsung as well positioned in the U.S. at AT&T and with many Europeancarriers, although there is room for increased traction with European consumer

We believe the company is planning new models for the European region to

better position it in the higher end of the market.

We note that the company has a new head for the handset unit who is taking amore aggressive approach to cost cutting and market share gains. As such we

could see a more aggressive Samsung than we have seen in the past.

Exhibit 29.

Samsung Handset Overview

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1Q04A

2Q04A

3Q04A

4Q04A

1Q05A

2Q05A

3Q05A

4Q05A

1Q06A

2Q06A

3Q06A

4Q06A

1Q07A

2Q07A

3Q07A

4Q07E

1Q08E

2Q08E

3Q08E

4Q08E


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

HandsetMarketShare



Flirting with the low end

Ultra handsets leading theway

3G has room to grow

Culture changing


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Exhibit 30.

Sampling of Samsung Phones

UpStage Juke Blackjack II SGH-U700 SGH-700V Giorgio Armani

EV-DO CDMA HSDPA HSDPA HSDPA EDGE


Sony EricssonSony Ericsson saw a sharp increase in its handset market share in 2007,helped by continued strong demand for the companys signature Walkman andCybershot phones. Since its initial launch in August 2005, the Walkman line of

handsets has surpassed 45 million shipments. The Cybershot line, which was

launched in June 2006, has topped 13 million units. Both brands work well with

the companys focus on multimedia and Internet functionality.

Sony Ericssons portfolio is particularly strong in the mid to high end, whichas helped it gain traction across several regions, including the high-end Asian

markets and Europe. Key handsets include the mid-tier W580, two new HSDPA

models (W910 and K850), and the P1 smart phone. The W960 and K630 could

also contribute significantly in 2008.

In general, we are somewhat less enthused about Sony Ericssons new product

portfolio, yet consumers have responded fairly well. We also note a change inleadership,which has yet to translate into a new strategya point to watch

that could have an impact on performance.

Strategically, Sony Ericsson has recently put more emphasis on emerging

markets and lower-priced handsets. The benefits of this have already been

seen with some traction in Latin America. Managing the growing low-end

exposure (which we would characterize as still testing the water) is critical as i

could weigh further on ASPs and margins (as it has recently). We have yet tosee what impact the companys low-end ODM deal with Sagem will yield.

Of the regions where we believe the company can gain traction, we note Latin

America (for low end) where the company is considered a top 3 brand name as

well as in its core European market. Similar to Nokia, the U.S. has been a

disappointment given the lack of CDMA products and brand exposure.

Still flexing its global brandmuscle

Strong in the mid to high

end

Low end more of a focusthan it has been


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Exhibit 31.

Sony Ericsson Handset Overview

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1Q04A

2Q04A

3Q04A

4Q04A

1Q05A

2Q05A

3Q05A

4Q05A

1Q06A

2Q06A

3Q06A

4Q06A

1Q07A

2Q07A

3Q07A

4Q07E

1Q08E

2Q08E

3Q08E

4Q08E


0%

2%

4%

6%

8%

10%

HandsetMarketShare



Exhibit 32.

Sampling of Sony Ericsson Phones

W580 W910 K770 P1 K850 W960

GSM HSDPA UMTS UMTS HSDPA UMTS


LG ElectronicsLG remains a solid performer, but has yet to truly break out. The company

saw strong CDMA demand in 3Q07 (up over 35% QoQ), while demand for 3G

WCDMA was weak (down 32% QoQ) largely due to product transitions with keycarriers such as AT&T and Hutchison. We expect a WCDMA rebound in 4Q07 an

look for the new product momentum to carry into 2008.

A solid performer


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Exhibit 34.

Sampling of LG Phones

Rumor Chocolate Shine Venus Voyager Viewty

CDMA EV-DO HSDPA EV-DO EV-DO HSDPA


Research in MotionBuilding off its commanding share in enterprise, Research in Motion is now

pushing forward in the consumer smart phone market. The companysPearl and Curve devices in particular are riding a wave of strong demand foremail and other multimedia functionality and have exceeded the companys

shipment targets. Enterprise also remains strong with the 8800 and the

crossover Curve is selling well there.

Outside North America, RIM is now well established in Europewith solidrelationships with major carriers and has partnered with Carphone Warehouse the U.K. After years of obstacles, RIM has finally entered the Chinese markevia Alcatel Shanghai and its deal with China Mobile. RIM is initially targeting

multinational companies and enterprises in China, but we expect it to make

strides in the consumer market as it gains traction. India also remains a

potential growth driver, with traction limited by RIMs current allocation of

internal resources. Again we look for the initial traction to come in enterprise.

Despite high-profile entrants in the smart phone market, RIMs primarychallenge at the moment is meeting demand, not fending off

challengers. Carriers continue to look at Blackberry devices and data services

as a strong avenue to boost their average revenue per user. And while the

iPhone is a competing device, it has also been a strong catalyst for RIM and the

overall smart phone market, highlighting the value of email and multimedia an

increasing traffic in stores.

We expect RIM to continue to segment the market with different features (suchas WLAN and GPS) addressing various segments and believe its product road

map will spur further growth and replacements. There is speculation of a

BlackBerry 9000 series targeting the consumer market, which is expected in

early 2008 with evolutionary improvements such as 3G HSDPA, an enhanced

user interface, updated browser and stronger multimedia capabilities.

We also except RIM to introduce a touch screen smart phone, but do not expecit to displace its QWERTY-based smart phones. Outside of the 9000 series, we

Leading the smart phonecharge

International expansion hasa long way to go

iPhone a demand catalyst,not competitive threat so far

Keeping up with featuretrends


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expect new iterations of the 8000 series, Curve and Pearl to ramp in 2008 that

feature 3G, updated cameras, GPS and/or WLAN.

RIM should continue to see market share gains and solid margins for the

foreseeable future. Despite its growing focus on the consumer market where itwould face much stronger competition, its growing distribution and geographic

reach should make for sustainable gains.

Exhibit 35.

Research in Motion Handset Overview

0

1,500

3,000

4,500

6,000

7,500

1Q05A

2Q05A

3Q05A

4Q05A

1Q06A

2Q06A

3Q06A

4Q06A

1Q07A

2Q07A

3Q07A

4Q07E

1Q08E

2Q08E

3Q08E

4Q08E


0.0%

0.4%

0.8%

1.2%

1.6%

2.0%

Han

dsetMarketShare



Exhibit 36.

Sampling of Reserch in Motion Phones

8820 8830 Pearl 8120 Pearl 8130 Curve 8310 Curve 8320

EDGE, GPS, Wi-Fi EV-DO, GPS EDGE, Wi-Fi EV-DO, GPS EDGE, GPS EDGE, Wi-Fi



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Handset ShipmentsIn this section, we expand our worldwide handset forecast to highlight thespecific trends in each major region and broadly look at a mature vs. emerging

market split. The key trends presented include the growing importance of

emerging markets (particularly Asia and the MEA) in the global handset mix, a

expanding mobile carrier footprint crossing country boundaries, and the first

signs of 4G discussions in North America and Western Europe.

Handset Shipments by RegionWe start off emphasizing the importance of emerging markets to bothsubscriber net additions and handset shipments. To contrast the

significantly different growth opportunities these two groups represent, wehighlight the strong 2007-2011 CAGR of 12.9% for handset shipment growth i

emerging markets against a modest 5.0% for mature markets. Over time thiscreates a measurable change in mix, withemerging markets climbing from63.4% of global handset shipments in 2007 to 69.8% of global

shipments in 2011.

The two key regional drivers in the emerging market growth are Asia Pacific anMEA. In Asia Pacific, we note China, India and Indonesia, which are expected t

grow at a strong 2007-2011 CAGR of 13.0%, 21.5% and 14.0%, respectively. the MEA, we note a 12.8% 2007-2011 CAGR for Nigeria with nearly 25 million

handset shipments in 2011.

We caution that developingregions are more sensitive to economic

downturns, government regulatory control, and political unrest than

mature markets and therefore could see more volatility. However, this

uncertainty is a double-edged sword and could result in our assumptions provinconservative (as they have in the past), particularly in the case of our

expectations for replacement purchases.

Macroeconomic factors could weigh on mature marketsas well, includingthe potential for far-reaching impact of the sub-prime banking concerns and

escalating oil prices. While we dont believe a recession would lead to consume

shutting down their mobile service, we could see replacement purchases beingdelayed. This is particularly important factor in the U.S. and Western Europe,

where replacement purchases drive overall shipments.

While a faltering economy could have global repercussions on shipments, were

firm believers that handset shipments would weather a slowdown better an

see less volatility than most technology markets. Simply put, mobile

communication has implanted itself as a mandatory requirement for many jobsand an invaluable resource in our personal lives for staying in touch, providing

mobile entertainment, and aiding personal safety.

Emerging markets drivehandset shipments

Emerging markets sensitiveto economic risk andpolitical factors

Mature markets sensitive tooil prices and a creditcrunch


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Exhibit 37.

Worldwide Handsets Shipments by Selected Countries (Thousands of Un

2001 2002 2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(E) CAGR 03-07 CAGR 07-

Latin America

Brazil 8,684 9,881 15,876 28,407 35,074 27,702 31,375 29,155 33,499 37,145 41,076 18.6% 7.

Mexico 10,222 8,549 11,159 14,998 17,490 19,465 23,402 24,778 26,074 27,183 28,218 20.3% 4.

Rest of Latin America 14,828 13,508 18,199 32,455 41,653 59,430 64,372 78,003 82,689 85,807 88,210 37.1% 8.

East Europe

Russia 6,194 10,164 19,896 28,031 28,677 38,757 41,944 42,634 45,729 48,785 51,125 20.5% 5.

Ukraine 1,807 1,989 3,990 7,579 8,671 13,855 16,982 15,219 16,730 18,595 20,373 43.6% 4.

Rest of East Europe 16,590 22,547 24,896 32,437 39,194 52,626 56,266 67,822 72,467 76,154 81,285 22.6% 9.

Asia Pacific - Emerging

China 59,427 61,849 62,297 75,126 90,314 122,554 1 58,647 190,586 221,737 240,644 258,907 26.3% 13.

India 2,371 5,001 17,794 24,147 33,278 65,167 100,932 133,068 165,293 191,869 220,298 54.3% 21.

Indonesia 2,976 5,137 7,155 11,303 18,091 25,576 33,666 40,317 46,589 52,397 56,808 47.3% 14.

Rest of Asia Pacific 5,114 11,841 11,410 33,990 52,159 62,401 69,734 85,483 98,765 109,438 118,908 57.2% 14.

MEA

Nigeria 388 1,144 1,699 6,321 10,210 13,172 15,372 18,241 20,662 23,457 24,875 73.4% 12.

Rest of MEA 22,810 25,501 37,248 51,914 83,475 93,028 103,733 115,700 132,892 148,954 173,108 29.2% 13.

Emerging Markets 151,412 177,111 231,618 346,710 458,286 593,733 716,425 841,006 963,126 1,060,428 1,163,193 32.6% 12.

Delta 25,699 54,507 115,092 111,576 135,447 122,692 124,582 122,120 97,302 102,765

Growth 17.0% 30.8% 49.7% 32.2% 29.6% 20.7% 17.4% 14.5% 10.1% 9.7%

North America 64,283 80,905 80,784 101,988 122,226 142,790 153,509 165,190 177,085 185,384 190,338 17.4% 5.

West Europe

France 15,876 14,578 15,839 17,026 19,462 20,818 20,988 22,275 23,490 24,693 25,828 7.3% 5. Germany 21,754 20,414 24,150 28,678 29,569 33,847 37,197 40,309 43,098 45,229 47,041 11.4% 6.

Italy 7,461 18,763 17,515 21,911 25,725 34,060 35,015 38,132 41,137 43,913 46,682 18.9% 7.

Spain 11,886 12,875 13,853 13,230 15,614 18,884 19,555 20,666 21,647 22,458 23,183 9.0% 4.

UK 18,902 20,215 22,280 26,317 29,583 30,760 31,718 33,148 34,540 35,926 37,297 9.2% 4.

Rest of West Europe 25,822 38,201 30,056 33,634 35,468 30,797 35,142 35,992 37,175 39,247 40,898 4.0% 3.

Asia Pacific - Mature

Japan 38,098 39,963 50,442 45,560 45,807 47,099 48,979 50,717 50,897 51,130 52,021 -0.7% 1.

South Korea 13,008 13,172 13,367 14,865 14,550 16,431 18,029 18,158 18,347 18,557 18,959 7.8% 1.

Rest of Asia Pacific* 14,958 11,525 12,133 13,578 13,982 16,479 13,114 18,623 20,724 20,914 20,887 2.0% 12.

Mature Markets 232,048 270,611 280,420 316,786 351,987 391,965 413,246 443,210 468,140 487,452 503,132 10.2% 5.

Delta 38,563 9,809 36,366 35,201 39,978 21,281 29,964 24,930 19,312 15,681

Growth 16.6% 3.6% 13.0% 11.1% 11.4% 5.4% 7.3% 5.6% 4.1% 3.2%

Total 383,460 447,722 512,038 663,496 810,273 985,698 1,129,671 1,284,216 1,431,266 1,547,880 1,666,325 21.9% 10.2

Delta 64,262 64,316 151,458 146,777 175,425 143,973 154,545 147,050 116,614 118,445

Growth -6.7% 16.8% 14.4% 29.6% 22.1% 21.7% 14.6% 13.7% 11.5% 8.1% 7.7%


* Includes Australia, Hong Kong, New Zealand, and Taiwan


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Exhibit 38.

Worldwide Handset Shipments by Selected Countries (% of Total Shipments)

2001 2002 2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(

Latin America

Brazil 2.3% 2.2% 3.1% 4.3% 4.3% 2.8% 2.8% 2.3% 2.3% 2.4% 2.5

Mexico 2.7% 1.9% 2.2% 2.3% 2.2% 2.0% 2.1% 1.9% 1.8% 1.8% 1.7

Rest of Latin America 3.9% 3.0% 3.6% 4.9% 5.1% 6.0% 5.7% 6.1% 5.8% 5.5% 5.3

East Europe

Russia 1.6% 2.3% 3.9% 4.2% 3.5% 3.9% 3.7% 3.3% 3.2% 3.2% 3.1

Ukraine 0.5% 0.4% 0.8% 1.1% 1.1% 1.4% 1.5% 1.2% 1.2% 1.2% 1.2 Rest of East Europe 4.3% 5.0% 4.9% 4.9% 4.8% 5.3% 5.0% 5.3% 5.1% 4.9% 4.9

Asia Pacific - Emerging

China 15.5% 13.8% 12.2% 11.3% 11.1% 12.4% 14.0% 14.8% 15.5% 15.5% 15.5

India 0.6% 1.1% 3.5% 3.6% 4.1% 6.6% 8.9% 10.4% 11.5% 12.4% 13.2

Indonesia 0.8% 1.1% 1.4% 1.7% 2.2% 2.6% 3.0% 3.1% 3.3% 3.4% 3.4

Rest of Asia Pacific 1.3% 2.6% 2.2% 5.1% 6.4% 6.3% 6.2% 6.7% 6.9% 7.1% 7.1

MEA

Nigeria 0.1% 0.3% 0.3% 1.0% 1.3% 1.3% 1.4% 1.4% 1.4% 1.5% 1.5

Rest of MEA 5.9% 5.7% 7.3% 7.8% 10.3% 9.4% 9.2% 9.0% 9.3% 9.6% 10.4

Emerging Markets 39.5% 39.6% 45.2% 52.3% 56.6% 60.2% 63.4% 65.5% 67.3% 68.5% 69.8

North America 16.8% 18.1% 15.8% 15.4% 15.1% 14.5% 13.6% 12.9% 12.4% 12.0% 11.4

West Europe France 4.1% 3.3% 3.1% 2.6% 2.4% 2.1% 1.9% 1.7% 1.6% 1.6% 1.5

Germany 5.7% 4.6% 4.7% 4.3% 3.6% 3.4% 3.3% 3.1% 3.0% 2.9% 2.8

Italy 1.9% 4.2% 3.4% 3.3% 3.2% 3.5% 3.1% 3.0% 2.9% 2.8% 2.8

Spain 3.1% 2.9% 2.7% 2.0% 1.9% 1.9% 1.7% 1.6% 1.5% 1.5% 1.4

UK 4.9% 4.5% 4.4% 4.0% 3.7% 3.1% 2.8% 2.6% 2.4% 2.3% 2.2

Rest of West Europe 6.7% 8.5% 5.9% 5.1% 4.4% 3.1% 3.1% 2.8% 2.6% 2.5% 2.5

Asia Pacific - Mature

Japan 9.9% 8.9% 9.9% 6.9% 5.7% 4.8% 4.3% 3.9% 3.6% 3.3% 3.1

South Korea 3.4% 2.9% 2.6% 2.2% 1.8% 1.7% 1.6% 1.4% 1.3% 1.2% 1.1

Rest of Asia Pacific* 3.9% 2.6% 2.4% 2.0% 1.7% 1.7% 1.2% 1.5% 1.4% 1.4% 1.3

Mature Markets 60.5% 60.4% 54.8% 47.7% 43.4% 39.8% 36.6% 34.5% 32.7% 31.5% 30.2

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0


* Includes Australia, Hong Kong, New Zealand, and Taiwan

North AmericaWe believe handset shipments in North America will reach 165.2 million

units in 2008, up 7.6% from 2007, with most of the increase coming from

replacements. We expect shipments to continue to slowly increase over the neseveral years, reaching 190.3 million units in 2011, representing a 2007-

2011 CAGR of 5.5%. New subscriber growth is minimal (a 3.2% CAGR), showin

just how important the replacement market is in this region.

North America is well into the 3G transition with CDMA carriers Verizon

completing its EV-DO Rev. A network build and Sprint Nextel already completin

the majority of its EV-DO Rev. A network build. Both of these carriers arealready moving onto planning for Rev. B and 4G planning. AT&T has also alread

widely deployed its 3G WCDMA/HSDPA network and should see wide deployme

of HSUPA in 2008.

In sizing the 3G market, we project 2008 EV-DO shipments of 66.1 millionthis region (out of total CDMA shipments of 101.9 million) with a 2007-2011

CAGR of 20.0%. WCDMA continues to trail EV-DO in absolute numbers, althoug

165.2 million mobilehandsets to ship in 2008E

3G transition well under way


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we saw a sharp ramp of the technology in 2007 at AT&T. We expect total

WCDMA shipments to reach 33.0 million in 2008(out of a total

GSM/WCDMA market of 60.8 million) with a 2007-2011 CAGR of 48.4%.

T-Mobile is the only major carrier yet to deploy commercial 3G service,although not for lack of preparation. The carrier has earmarked about $2.7

billion for 3G infrastructure equipment over the next several years. At this poin

T-Mobile is actively clearing spectrum for its WCDMA/HSPA build and should

launch commercial service in early 2008. T-Mobile started selling its first 3G

handset (Samsung T639) in October 2007.

With 3G well entrenched, the carrier focus at this point is on retiring older2G technologies and preparing for 4G. Sprint Nextel is deemphasizing iDEN

although the carrier continues to face a bit of a dilemma converting its iDEN

customers to CDMA (given the superior performance of push-to-talk over theproprietary iDEN network). Over the long term, GSM/GPRS and CDMA 1xRTT a

also destined for lesser roles at AT&T, Verizon and Sprint.

4G technology discussions are already heating up, with Verizon Wirelessalready selecting LTE, which is a departure from the Qualcomm-promoted

path of UMB. In preparation for 4G, we expect Verizon to be a major player inthe FCCs upcoming spectrum auction in January and a possible launch its 4G

LTE network in 2010 (at the earliest).

Sprint still favors mobile WiMAX as its 4G choiceand claims it is on track

for a 2008 commercial launch. But with CEO Gary Forsees resignation in late2007, many have questioned whether Sprints new leader Dan Hesse will be ascommitted to the unproven technology. Fueling the fire is the recent decision b

the company (made prior to Mr. Hesses hiring) to end its partnership with

Clearwire to co-deploy WiMAX in the U.S.

With Sprint contractually obligated to certain coverage requirements in

2008, some level of commercial service is likely. We expect the first wave of

products supporting the network to be limited to PC cards and USB modems. Athis point, we are not building WiMAX handsets into the forecast and would loo

for most that do ship to be multi-mode devices including CDMA.

Despite its well-documented troubles, Motorola continues to lead the North

American handset market by a wide margin, with an estimated market sharof approximately 36% in 2007, down a modest 3% points year over year(compared to their overall decline of 8% points). The No. 2 and No. 3 vendo

Samsung (~19%, +2% YoY) and LG (~16%, +1% YoY) trail Motorola

by a wide margin, but are building on a strong base and are gaining share as

Motorola reorganizes.

Nokia (~8%, 6% YoY) is a distant No. 4, losing share year over year and yet

gain much 3G footing, although this could change as WCDMA gains widerdeployment. Up-and-comers in this region include Research in Motion

(Blackberry) and Apple (iPhone), both making a strong push in the smart phonmarket and gaining mindshare in the marketplace.

T-Mobile soon to join the bigthree with 3G

Verizon chooses LTE for 4G

Will Sprint back away fromWiMAX?

Motorola safe in the No. 1market share spot

Keep an eye on RIM andApple


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Exhibit 39.

Total Handset Shipments in North America (Thousands of Un

2001 2002 2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(E) CAGR 07-

AMPS/TACS/NMT 1,152 235 142 44 21 17 0 0 0 0 0 N

GSM/GPRS/EDGE 5,172 9,951 11,198 18,730 24,563 33,115 31,623 27,752 18,417 7,786 3,997 -40.4

TDMA 13,219 15,500 7,786 3,145 1,066 282 0 0 0 0 0 N

CDMA 37,173 46,849 52,043 64,825 66,613 60,972 47,434 35,846 21,250 11,123 10,469 -31.5

EVDO 0 0 0 3,408 13,445 27,844 50,658 66,076 86,772 101,961 105,067 20.0

W-CDMA 0 0 0 334 874 3,141 14,583 33,038 49,761 64,514 70,806 48.4PDC 0 0 0 0 0 0 0 0 0 0 0 N

iDEN 7,568 8,369 9,614 11,502 15,645 17,420 9,211 2,478 885 0 0 N

Total 64,283 80,905 80,784 101,988 122,226 142,790 153,509 165,190 177,085 185,384 190,338 5.5

Growth -11.4% 25.9% -0.1% 26.2% 19.8% 16.8% 7.5% 7.6% 7.2% 4.7% 2.7%


Latin AmericaWe expect handset shipments in Latin America to reach 131.9 millionunits in 2008, up 10.7% from 2007. And by 2011, we look for shipments to

increase to 157.5 million, representing a solid 2007-2011 CAGR of 7.2%. Thecurrent state of affairs in Latin America is very similar to that seen last year.

GSM is by far the dominant technologyin this region, with 3G WCDMA yet gain much traction and CDMA and TDMA shipments declining. Network

transitions away from CDMA and the older TDMA standard in the past two year

have driven the GSM strength.

New subscriber activity in this region remains fairly solid, helped by ever-decreasing handset prices. Handset prices have come down faster than w

expected, with the lowest now below $20. With single chip baseband/radio

handsets yet to see wide deployment, prices will fall further, helping drive even

further subscriber penetration in this region. We are also seeing the larger

installed base help drive more replacement purchases.

Mobile carriers are yet to heavily push 3G adoption in this price-

conscious region, but we are starting to see early stages of 3G deployments key markets. For example, America Movil has already started investing heavily

in 3G in several markets with its Brazilian unit, Claro, currently rolling out 3G

networks in Sao Paulo, Rio de Janeiro, Porto Alegre and the capital Braslia.

We see 2008 as a transitional year for 3G WCDMA, with stronger 3G

adoption coming in 2009 and 2010. As the market develops, we expect totalWCDMA shipments to grow from 5.3 million in 2008 to 30.7 million in 2011, or

2007-2011 CAGR of 83.0%.

We note that demand in Latin America is perhaps more volatile than in

any other region, and history has shown that handset demand can be very

inconsistent from one quarter to another depending on carrier priorities. Key

factors include the involvement in regulatory bodies in competition as well asunpredictable changes in subsidy policies in large markets such as Brazil which

could have a material impact on purchasing decisions.

From a vendor perspective,No. 1 Nokia (~31%, 1% YoY) and No. 2

Motorola (~28%, 3% YoY)continue to dominate handset shipments in

this region. However, both companies face a growing competitive threat,

withSony Ericsson(~13%, +5% YoY) and LG(~12%, +4% YoY) showing

strong share gains YoY and Samsung(~8%, +2% YoY) solid gains.

131.9 million mobilehandsets to ship in 2008E

Lower handset prices still agrowth driver

3G in its early stages

2009 and 2010 should seegood 3G traction

Nokia No. 1; LG and SonyEricsson making a strongpush


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34

Exhibit 40.

Total Handset Shipments in Latin America (Thousands of Uni

2001 2002 2003 2004 2005 2006 2007(E) 2008(E) 2009(E) 2010(E) 2011(E) CAGR 07-

AMPS/TACS/NMT 1,493 322 188 93 82 77 76 0 0 0 0 N

GSM/GPRS 2,666 4,772 14,335 35,503 62,648 79,829 106,145 117,818 123,341 122,060 119,231 2.9

TDMA 19,236 15,569 17,096 13,160 10,140 4,812 1,191 792 285 0 0 N

CDMA 10,338 11,276 13,615 27,104 21,326 21,319 8,102 6,333 3,699 1,802 788 -44.2

EVDO 0 0 0 0 21 559 894 1,715 4,268 5,855 6,773 65.9

W-CDMA 0 0 0 0 0 0 2,740 5,277 10,670 20,418 30,713 83.0PDC 0 0 0 0 0 0 0 0 0 0 0 N

iDEN 0 0 0 0 0 0 0 0 0 0 0 N

Total 33,734 31,938 45,234 75,860 94,216 106,596 119,149 131,935 142,261 150,135 157,505 7.2

Growth 5.5% -5.3% 41.6% 67.7% 24.2% 13.1% 11.8% 10.7% 7.8% 5.5% 4.9%


Western EuropeWe expect handset shipments in Western Europe to reach 190.5 millionunits in 2008, up 6.1% from 2007. Europe is a replacement-driven market,

which has stayed strong with the move to 3G. We project shipments in this

region to continue to show modest growth as 3G adoption increases reaching

220.9 million units in 2011, representing a 2007-2011 CAGR of 5.3%.

From a technology standpoint, Western Europe is uncomplicated, with the

pervasive GSM/GPRS technology steadily giving way to WCDMA andHSPAtraction. Most carriers at this point are well into their second and third

phase of 3G deployment, expanding network capacity to meet subscriber

demand (to support data intensive features such as video calling, music, andstreamed mobile TV). With that said, we highlight that many consumers are st

buying 3G handsets for their high-end features and styling (as the best handse

available) and not necessarily for the associated data services.

Carriers continue to shift their handset portfolios toward a higher 3G mix (in

some cases roughly half the handsets offered), and prices for unsubsidized 3Ghandsets continue to come down. Given the strong support, we now expect

141.9 million 3G WCDMA handsets to ship in Europe in 2008 , growing to

198.8 million in 2011. This implies a 2007-2011 CAGR of 19.5%.

Nokia (~39%, +3% YoY) remains the clear leader in Europe, with thestrongest brand recognition and a deep GSM and 3G WCDMA portfolio that is

well tailored for this region. However, competitive pressures are increasing witattractive handsets from Sony Ericsson (~16%, +4% YoY), Samsung (~18%,

+3% YoY) and LG (~5%, +1 YoY) putting pressure on the vendor in both

GSM/GPRS and 3G WCDMA markets. Without a distinguishing 3G portfolio,

Motorola (~12%, 5% YoY) has seen it share slide in this region and is unlikely

to see much of a recovery until possibly late 2008 or 2009.

We note the introduction of Apples iPhone in this region by T-Mobile in Germanon November 9, 2007, by O2 in the U.K. on the same day, and by Orange in

France on November 29. We look for the iPhone to help push up

replacement rates in 2008 similar to what happened in the U.S. in 2H07.

Nokia, as well as the other top OEMs, is planning a new wave of touch screenmodels in response, which only raises the design bar higher and should pull

more consumers into stores.

190.5 million mobilehandsets in 2008E

3G getting the upper hand

Nokia No. 1, but competitivepressures heating up

The iPhone could drivereplacement rates higher, asit did in the U.S.


35/70


36/70


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Asia PacificAsia Pacific remains the single most important contributor to our handset

forecast, with India and China the two most important countries in the region.With these two countries as the foundation for growth, we project handset

shipments in Asia Pacific will reach 537.0 million units in 2008 , up 21.2

from 2007. As Asia Pacific matures, we are starting to see a bigger replacemen

market, which is driving both growth and interest in higher-tier handsets. With

this in mind, we expect shipments to reach 746.8 million

Documents

CIBC 2008 Handset Guide