Raising the tone

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The company only recently employed celebrity endorcements, but Vertu fans are known to include Madonna, David Beckham and Gwyneth Paltrow.

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The company's phones are only available in its own branded stores and a handful of upscale department stores, such as Harrods and Selfridges in the UK.

Many celebrities have been spotted carrying a Vertu, including Madonna, Gwyneth Paltrow and David Beckham, but until recently the company didn't have an official celebrity ambassador.

It recently named one: Malaysian-born Chinese actress Michelle Yeoh, best known to international audiences from her role in the 1997 James Bond film Tomorrow Never Dies, and in Academy Award-winning action film Crouching Tiger, Hidden Dragon.

"The [Vertu owners] we are most proud of are the people that are obviously wealthy, but more importantly they are successful and accomplished people," Torres says.

"Essentially we want to be with people who are not just famous, but people who are actually accomplished and successful."

Some of the current Vertu owners include royal family members in the Middle East, he says.

Vertu has been so successful in targeting what one analyst referred to as "the top 1 percent of the market" that other luxury brands are now eying the sector with growing interest.
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Prada announced the LG Prada phone in Decembr 2006, Giorgio Armani launched his own mobile in September last year, and Christian Dior entered the fray in May this year.

"The success that we have experienced and the fact that there are quite a lot of people thinking about entering this market is proof that there will be a very big market for luxury mobile phones in the future," Torres says.

US-based ABI Research believes revenue from luxury branded handsets will exceed $11bn next year, increasing to more than $43bn in 2013. In a study released last month, the technology research firm notes that cut-throat competition in the mobile phone industry has left vendors struggling to deal with low margins.

With consumers highly aware of brand image and premium value, luxury branded phones could be a welcome addition to these companies' long-term growth strategies.

Against this backdrop, Motorola has teamed up with Swiss watchmaker Tag Heuer, Samsung with Armani, and LG with Prada.

"For luxury goods producers, mobile phones are a logical addition to their basic product portfolios of jewellery, watches, and other fashion accessories," ABI research director Kevin Burden says.

"From the perspective of handset manufacturers, a luxury mobile phone does not simply mean a new handset model, it represents a meaningful strategic approach to increased brand equity."

Vertu's strong performance contrasts sharply with parent company Nokia, which recently spooked markets by cutting its market share forecast for the third quarter of the year.

Nokia said sliding consumer confidence and tough competition for cheap mobile phones, especially in developing markets, would hit the 40 percent market share it achieved in the second quarter of the year.

In Vertu's target group the mood is mostly still buoyant; in a slowing economy, it is usually the very poor and the people in the middle who change their spending habits. The super-rich continue to spend on luxury items such as watches, bags and mobiles.

"I think they will get impacted by the recession at some point, but probably less than other vendors out there. They're probably quite recession proof," Neil Mawston, director of wireless device strategies at Strategy Analytics in the UK, says.

In terms of the global phone market, luxury handsets are still a relatively small piece of the pie. Strategy Analytics forecasts Vertu will sell around 50,000 phones this year.

But worldwide, the average person only spends $100 on their handset, and profit margins in Vertu's market segment are a lot higher than in the rest of the industry. "That's what makes it attractive," Mawston says.

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