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SA smartphone prices being pushed down

Cape Town - Falling smartphone prices means mass adoption of these devices in South Africa is set to take off, say local mobile operators.

"We already work with the device manufacturers and there are a number of issues," MTN Group President Sifiso Dabengwa told Fin24 regarding the challenge of reducing pricing.

"The first thing is that at this moment in time, there just isn't a data enabled 3G device for less than about $30. That's really the problem," he added.

Dabengwa added that from a retail point of view, players in the industry also need to be more creative in terms of providing credit for customers to pay for handsets over a period of time.

Low cost phones have fallen through the R1 000 level as operators push manufacturers to lower the price even as the rand weakens against major international currencies.

"You want to drive down your low-cost device to as low as possible. Currently we're buying a device for about $40, and it's retailing for just under R600 in terms of Android devices," Shameel Joosub, Vodacom Group CEO, told Fin24.

Perfect price

He indicated the ideal price level for smartphone adoption in SA.

"Obviously, we're constantly working to try and bring that [cost] down further. If we can get smartphones to $25, I think it will be fantastic."

While manufacturers use flagship devices such as the Samsung Galaxy Note 4, the Sony Xperia Z3 or LG G3 to promote the brand, it is usually the lower cost devices that are the bread and butter that drives market share and sales.

And even though research firm Gartner found that smartphones outsold feature phones for the first time in 2014, it revealed that lower cost manufacturers were accelerating their market share at the expense of bigger players.

"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 Anshul Gupta, principal research analyst at Gartner.

But beyond cost, cheaper smartphones need to be quality devices that don't put subscribers off using the technology because of a poor experience.

"It's also important to make that it's a good quality phone, and that's why we're not just chasing low cost, let's call it inferior devices. We're making sure that it comes from a credible supplier and it's a credible smartphone, if you like," said Joosub.

Developing country focus

Doubling down on the research, Gartner revealed that the engine of smartphone growth was in developing countries where subscribers are traditionally price sensitive.

"This increasing contribution of smartphones was led by growth in Latin America, the Middle East and Africa, Asia/Pacific and Eastern Europe, where smartphone sales grew by more than 50% in the fourth quarter of 2013."

Dabengwa said that MTN is working with manufactures to reduce the cost of smartphones.

"At the end of the day, the real issue is to make these devices more affordable. Once they get to the $20 level, I think we'll see a major uptake, but right now unfortunately, although we've been pushing them... there are lots of lesser known manufacturers in Asia who have been working to get devices in that kind of price range."

Watch what Sifiso Dabengwa had to say about how smartphone subsidies distort the market in this online video:





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