The battle for the low end

10 May 2006
00:00
News
Stories

The realignment of heavyweight vendors right now underlines the tectonic shifts in the suppliers' market. The technology shift is toward open platforms and softswitches; the market shift is toward low-income segments.

Most new subs are from emerging mobile markets. These are people for whom the mobile phone is a major investment - some 5%-10% of their monthly income in many cases. It's considered a worthy one, though, because it satisfies an economic need or an aspiration.

The GSM Association has picked up on this with a program to facilitate the production of low-end handsets. It ran a tender last year in conjunction with emerging market operators, won by Motorola, which has since put 12 million devices at $40 and below into the market.

That's commendable, but is only a fraction of the 817 million phones shipped in 2005.

It's not just about the device. GSMA's own figures show the handset cost is the smallest component of a mobile service.

Over a typical three-year lifespan of a handset, the phone accounts for just 14% of the total cost of ownership (TCO). That's less even than the amount taken in taxes, which is 15%. Far and away the biggest proportion goes on service fees - 71%.

The opportunity for vendors is to come up with ways of cutting TCO. The obvious thing is to do what the leading GSM/W-CDMA suppliers have done, which is to bring to market solutions that both reduce capex and opex for rural networks. That's a bit of a no-brainer.

Biggest mobile market

Nokia has taken this a couple of steps further, unveiling its emerging market program at a gig in Chongqing in western China. With a total population of 30 million (adding 1,800 people a day, or the population of Singapore in six years) the municipality is probably the biggest city in the world. Anyway you like to measure it, it's one of the biggest single mobile markets in the world.

Nokia aims to reduce the cost of owning a phone to $5 a month. Yet you can go too low in the market, points out Soren Petersen, senior VP of entry level phones.

Nokia once helped out in an unhappy effort to give away half a million CDMA phones in India, says Petersen. The campaign lasted just four days. 'People were just taking the free phones and 30 days of free calls and after that throwing them away,' Petersen said. The key is to find 'sustainable and healthy growth' by driving down the cost of ownership.

Nokia's bag of technology tricks for emerging markets includes AMR (adaptive multi-rate) - which enables operators to add voice capacity - and the device-based SAIC (single antenna interference cancellation), which reduces a handset's draw on the network.

It also is offering up a couple of business concepts.

One is 'prepaid tracker', an application that enables users to see just how much is left in their prepaid accounts. That helps operators drive up network airtime, and is now available under license to other vendors. 'You wouldn't drive your car if you didn't know how much was left in the tank,' explained one Nokia exec.

Related content

Comments
No Comments Yet! Be the first to share what you think!