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Cape Town - With the local launch of the Samsung Galaxy Note 4, the price of flagship smartphones has jumped into the spotlight.
The new flagship device will cost at least R499 per month on a Smart S contract from Vodacom, but that excludes a once-off cash payment of R999.
For the Smart M contract, Vodacom charges R599 for the device.
On MTN, the Galaxy Note 4 costs R549 on a My MTNChoice 100 contract.
The price reflects an upward trending price for smartphones which has seen the average price of a flagship phone increase from around R370 per month two years ago to around R500 this year.
Booming market
Part of the reason is the rand which has been declining against major currencies. In 2011, the rand traded at around R7 to the dollar, but this year, the local currency fell to around R10.50.
"We do our best to mitigate against the weaker rand, primarily by leveraging Vodafone's global purchasing strength. Having said that, any weakness in the rand does tend to translate into higher prices for the big name devices," Vodacom executive head of Media Relations & Social Media Richard Boorman told Fin24.
For comparison, the Samsung Galaxy S5, Galaxy Alpha and Sony Xperia Z2 retail for R499 on contract from Vodacom, while the HTC One (M8) at R499, LG G Flex and LG G3 (both R429) are available from MTN.
Both Vodacom and MTN have targeted lower cost smartphones to consumers who are price sensitive.
According to data from industry tracker Gartner, smartphone sales are booming and overtook feature phones for the first time in 2013.
However, the lower priced vendors are seeing healthy growth as they focus on Africa, South America and Asia.
"Mature markets face limited growth potential as the markets are saturated with smartphone sales, leaving little room for growth with declining feature phone market and a longer replacement cycle," said Anshul Gupta, principal research analyst at Gartner.
The result is that lower cost devices can often be a more important consideration in developing markets like SA for manufacturers, keen to expand their footprint.
Strategy
"Expanding our range of low-cost devices is a big strategic drive for us. As an example, the Vodacom Smart Kicka, which has been very popular and is the first Vodacom branded device, is a fully-fledged smartphone retailing for under R600. Ideally, we want to provide the right device at every price point," Boorman said.
Gartner numbers indicate that handset manufactures targeting the lower price segment have seen success.
"Huawei smartphone sales grew 85.3% in the fourth quarter of 2013 to maintain the No 3 spot year over year. Huawei has moved quickly to align its organisation to focus on the global market. Huawei's overseas expansion delivered strong results in the fourth quarter of 2013, with growth in the Middle East and Africa, Asia/Pacific, Latin America and Europe," said Gupta.
Samsung has a range of devices targeting a wide market segment and the South Korean company has a well-employed strategy of flagship marketing.
Gupta advised the company to build more mid-range capacity as Samsung faces the prospect of declining profit from its high-priced smartphones.
"Samsung will also need to build a clearer value proposition around its midrange smartphones, defining simpler user interfaces, pushing the right features as well as seizing the opportunity of bringing innovations to stand out beyond price in this growing segment."
The Galaxy Note 4 will be launched locally on Thursday.
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