Telecoms: Smart money is on Smart phones

By Gemma Ware
Posted on Wednesday, 4 January 2012 15:27

Nokia, Research in Motion and Huawei are competing for bigger stakes in the African handset market while mobile operators offer inexpensive package services to tap into an increasingly connected young population

The age of the $100 smartphone is in full swing. Now, low-priced handsets are challenging those of the top global brands for the biggest share of Africa’s booming telecoms markets. In September, Huawei, one of China’s leading telecoms manufacturers, threw $1m into an aggressive marketing campaign to launch its IDEOS smartphone, priced at less than $100, in Nigeria. It will have an uphill battle to win the favour of a Nigerian middle class obsessed with the latest and most expensive BlackBerrys, Samsungs and iPhones. Nigerians do not want to be second best. Liza de Wet, marketing director for East and Southern Africa at Huawei, says the company needs to build up its ‘brand equity’ on the continent and that it will start spending more on direct marketing to target consumers in Africa.

When Huawei launched the IDEOS smartphone in Kenya last September, executives thought the company would be lucky to sell the 60,000 ­devices ordered by Safaricom. But those flew quickly off the shelves, and Safaricom put in a top-up order for 150,000 more. For a smartphone, the handset is cheap, retailing at KSh8,490 ($84) with 500MB of data and 1,000 minutes included in the price. Adverts on 30 billboards across Kenya simply showed the phone, the price and the Facebook icon.

Nigeria has just been on fire in terms of the BlackBerry growth

Though smartphones currently make up only 10% of the handset market in Africa, telecoms analysts Canalys expects that to double by 2014. While top-tier smartphone manufacturers debate whether and when to launch low-cost models, the rest of the world’s handset manufacturers are turning their attention like never before to the young middle classes that have until now been unable to afford mobile internet.

When US tech giant Apple failed to launch an iPhone 5 at its much-hyped press event in early October, opting instead for an upgrade to the iPhone 4S, it also held off from releasing a ‘nano’ version of its iPhone. It is rumoured to be smaller, cheaper and aimed at consumers in emerging markets. Apple, it appears, is not quite worried enough about competition from smartphones carrying Google’s Android operating system for it to go full throttle to the lower end of the market. But it has dropped the price of its older iPhone models – the iPhone 4 will be available for $99 in the US and its predecessor will be free with a mobile phone contract. Apart from South Africa, Apple has not yet paid real attention to Africa, where its products are instead available as luxury imports.

Bumper pickings for Blackberry

For Canada’s Research in Motion (RIM), the makers of BlackBerry, Africa offers an increasingly bright spot on an other-
wise gloomy horizon. While RIM announced it was cutting 10% of its global workforce as sales dipped in Europe and North America, it overtook Nokia for the first time in terms of the share of devices shipped to Africa in the second quarter of the year.

RIM’s boost was partly due to the phasing out by Nokia of its Symbian operating system, with operators waiting until new handsets – promised by the end of 2011 – come online using Microsoft’s Windows Phone software.

It seems the success of BlackBerry in Africa took RIM by surprise. With offices in South Africa and Egypt, it is now opening more in Kenya and Nigeria. In July, 2011, the BlackBerry Curve 8520 became the top selling smartphone in Nigeria, where BlackBerry Messenger (BBM) service has become a national pastime for young middle-class Nigerians. It has even spawned a Nollywood comedy called Blackberry Babes. “Nigeria has just been on fire in terms of the BlackBerry growth,” says Patrick Spence, RIM’s managing director of global sales and regional marketing. “It’s our fastest-growing market, quarter over quarter, globally.”

Apart from Morocco and South Africa, Africa’s handset market is an open one, run by ­informal retailers such as Slot Systems. “The unique thing about Africa is that a lot of the operators do not want to be responsible for getting the devices into the countries and having to deal with putting them in all the shops,” says Spence.

It means carriers’ best leverage to attract smartphone customers is cheap data plans, targeted at particular segments and offering special deals for social networking services. Manufacturers are happy to negotiate with African operators on these pre-paid bundles. In Nigeria, Bharti Airtel launched its ‘BConnected’ package in June, offering subscribers access to BBM and other social networks for N1,580 ($10) per month. Sometimes manufacturers agree to give one operator exclusivity for a new handset for a set period. As part of an agreement Nokia has with pan-African operator MTN, it gave MTN Nigeria exclusive rights to sell its N7 handset for a couple of weeks.

Nokia is acutely aware of the competition in emerging markets from low-price Chinese handset manufacturers such as Techno and ZTE. Counterfeiters, too, love to take their lead from Nokia: a cheap Okia, some with space for four or five SIM cards, will sell just as well as the real thing. Nokia has learnt from its rivals and currently has five dual SIM phones on the market to cater for consumer demand. “What’s interesting is that we’ve actually seen many operators on the African continent want dual SIM devices because of them not [being] the incumbent in the market,” says Brad Brockhaug, vice president for sales at Nokia Africa.

In an increasingly crowded market, handsets themselves are not enough to win new customers. Nokia has begun to push its services out to low-end consumers. “One of the things that we’re really focusing on, particularly on the low-end, is how do we differentiate by bringing services and making sure that there’s an ecoystem around the low-end, so that African consumers, no matter what device they want to buy, are able to have similar life services,” says Brockhaug. “I don’t believe the African consumer only wants a device, I believe that they want a solution.”

Nokia’s Ovi Store – through which users can download applications, video and music – delivers 7m downloads per week in the Middle East and Africa, up almost 500% from last year.

Vodafone has a friend in Facebook

The next big race will be for carriers to sign partnerships with content providers. Vodafone, which operates in South Africa, Ghana and Kenya through its local partner Safaricom, is rubbing its hands that Facebook has agreed to let it launch the world’s first Facebook-centred smartphone aimed at emerging markets. In August Vodacom launched the Vodafone 555 Blue in South Africa. Retailing at R749 ($93) for prepaid customers, it syncs users’ contacts, messages and photos through Facebook.

“In the mid- and entry-level segment where people are still coming into the shops and replacing their phones and they used to be on non-smartpones, that is where the growth opportunity lies for us to then make relevant offers to inspire these customers to sign up to a data package,” says Peter Becker-Pennrich, director of terminals marketing for Vodafone. Though unwilling to discuss the details of its agreement with Facebook, Becker-Pennrich said Vodafone saw it as an acquisition tool that would also drive data revenues. Facebook, too, he says, is able to make its service “much more relevant” on a mobile for this new segment.

Even chip makers are getting in on the smartphone act. In Egypt, chip manufacturer Qualcomm acted as a broker between operator Mobinil and Huawei for the operator to launch its own-branded Huawei devices. “Because they supply 3G chip sets, it’s in their interest to get more 3G devices into the market,” says Pete Cunningham, senior analyst at Canalys.

But the techies should not get carried away. Despite all the attractiveness that an iPhone or BlackBerry brings to elites in Nairobi or Lagos, the vast majority of African subscribers still cannot afford smartphones. In Kenya, one of Africa’s most connected countries, around 6% have access to them, according to research agency TNS. New services such as Movirtu, which lets users access their mobile data via the cloud on compatible handsets, will help push internet take-up among poorly-
connected rural populations.

The arrival of the sub-$100 smartphone is only good news for a continent where mobile internet puts African users onto a global stage and opens up new opportunities for e-commerce and e-learning. The biggest transformational barrier to break will be for the $20-$30 smartphone. Watch this space.

This article was first published in the November edition of The Africa Report, on sale at newsstands, via our print subscription or our digital edition.

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