Right off the top, let’s clarify one key point: Cell phone users are using their phones more than ever, so it’s not the service side of the business that’s suffering. In fact, a recent survey of consumer preferences showed that phone service — be it cell or land line — was one of the last things people would give up when money got tight.

As a recent Reuters report reveals, growth in cell handset sales ground to a halt in the third quarter of this year. Only Samsung posted a gain in market share, and only because it aggressively cut prices with that goal in mind. Notably, handset giant Motorola last week posted a loss of nearly (US)$400 million for the most recent fiscal quarter — attributed largely to tanking handset sales.

The problem is that many cell users are simply not upgrading to newer, more feature-packed handsets as regularly as they used to.

As well, some cell service providers are how encouraging their subscribers to hold onto their old handsets rather than upgrading to new ones when they renew their service plan subscriptions, all in the name of offering less costly cell services and greening their industry, which has been criticised for generating mountains of old-handset techno-junk.

Industry observers say cell sales could well deteriorate further in Q4 2008 and into next year. Specifically, they foresee weak handset sales this Christmas season, traditionally a time when gift phone sales soar.