Phone makers devise strategies to capture N1.2trn smartphone market

With Nigerians expected to spend an estimated N1.2 trillion on smartphone device acquisition by 2015, mobile phone manufacturers are deploying smart marketing schemes to open up fresh revenue streams.

Phone manufacturers are increasing the array of device ranges branded and sold directly by network operators, as against the previous mode where almost only premium devices were presented in such deals.

“Some operators have commissioned phone manufacturers to build handsets that are designed to the operators’ specifications and which are typically sold under the operator,” said Matthew Reed, principal analyst, Middle East & Africa Regional Research, Informa Telecoms & Media.

The Etisalat Group, United Arab Emirates’ (UAE) operator, recently developed an own-brand, android-based, low-cost smartphone for some of its African markets. Phones in this scheme bear the brand name of the partner network rather than that of the manufacturer.

Etisalat’s Nigeria operations, with 18.7 million customers as at March 2014, rolled out a low-cost android smartphone, the P3, which is manufactured by China’s Tecno and uses the Snapdragon processor from United States-based chip maker Qualcomm and is branded ‘Etisalat’. Also, the device booting message, emblem and call sign are those of the network operator.

These emerging initiatives assist both manufacturers and mobile operators gain profit, as telecoms customers will often buy smartphones and other equipment through the most opportunistic deals. These marketing innovations by phone makers do not only introduce new areas of profit for them, but also create new opportunities for telcos to grow data revenues by bundling data with the smartphones.

As a second leg, phone makers are forging deals with finance companies to create device-payment plans for customers. In June, Core Group Nigeria, Apple’s value-added distributor for the country, entered into a partnership with Stanbic IBTC Bank to extend ‘iDeals’ – a zero percent interest finance offer for iPad, Mac and iPod, and Apple iPhone as well.

“Partnerships of this kind, between device makers, operators, and banks, and in some cases, content developers, are important mechanisms for encouraging the up-take of smartphones and other data devices in Africa,” said Reed.

Before now, phone makers had been aggressively rolling out cheaper smartphones with high functionality in order to encourage more consumers, especially those at the bottom of the pyramid, who for long have been restricted by cost of device acquisition to dump their low-end devices and purchase smartphones.

“Low-cost smartphones being introduced by Indian and Chinese manufacturers will be significant. Prices are dropping to $150 per handset. When that figure reaches $80, demand will really take off,” said Segun Ogunsanya, chief executive officer, Airtel Nigeria.

There is a shift in the focus of Nigerian consumers from phones with basic functionality to smartphones. This change in demand, according to market watchers, has caused a huge increase in sales of smartphones in Nigeria.

Chinese phone maker, Huawei, has projected an expected increase in sales to about 35 percent by 2015. This implies that about 30 million smartphones will be sold in Nigeria within the period.

Analysts say the average cost of a smartphone is about N40,000, considering that some high-end smartphones sell for as much as N100,000 while there are smartphones with price tags of as low as N20,000. If market expectations are that 30 million smartphones will be sold in Nigeria between now and 2015, it implies that N1.2 trillion will be spent buying smartphones over the period.

“The quest for more market share and revenue is the critical driving factor why phone makers are beginning to branch out into other areas. Phone makers are all trying to get in more customers from the mass market with the introduction of cost-effective smartphones,” said Onome Okwah, communications manager, Resourcery plc, in an interview.

Smartphones and other data-capable devices are becoming increasingly affordable as a result of competition, technology and economies of scale, as well as marketing efforts of operators, say market watchers.

Ben Uzor Jr