SINGAPORE-Motorola Inc. won a second contract from the GSM Association to supply an additional 6 million ultra-cheap mobile phones to emerging markets like India, Turkey, Pakistan, Thailand and elsewhere. The deal-similar to a February announcement between Motorola and the GSM Association-drops the wholesale price of the phones from $40 to less than $30.
“Connecting the unconnected is a rallying cry across Motorola,” said Ron Garriques, president of Motorola’s phone business. “In emerging markets, consumers and operators want mobiles that meet specific performance requirements while exceeding expectations for quality, reliability and design. Additionally, they want all of this at a value price.”
Motorola is so far the exclusive vendor to the GSM Association’s Emerging Market Handsets program. The program brings together 10 operators in emerging markets that want to sell inexpensive phones to their subscribers. Although Motorola has said the deals do not include purchase commitments, the goal of the program is to create enough demand for ultra-cheap phones to make it worthwhile to build the devices.
Motorola said it will begin selling its sub-$30 C113 and C113a handsets starting early next year. The company currently is selling is first batch of sub-$40 phones.
The GSM Association said that while wireless covers 80 percent of the world’s population, only 25 percent are able to afford it.
“In many of our operations, handset costs have proven to be a barrier to entry for prospective subscribers,” said Phuthuma Nhleko, chief executive officer of MTN Group, which has wireless subsidiaries in several African countries.
The GSM Association said its handset program has helped drop prices. Citing a Lehman Brothers report, the group said Motorola’s first batch of $40 phones helped boost Indian operators’ monthly net customer additions by one-third over previous months.
Despite the precipitous drop in handset prices, the GSM Association pointed to government tax structures as another barrier to growth. Indeed, the group said that in 16 of the 50 developing countries, taxes represent more than 20 percent of the total cost of owning and using a mobile phone. In 14 of the developing countries, the average mobile phone user paid more than $40 a year in taxes on handsets and mobile services.
“There is a great irony in the way governments tackle the digital divide,” said Rob Conway, the GSM Association’s chief executive. “They say they want more of their people to have access to communications and yet they impose high taxes on mobile phones and usage.”
While Motorola and the GSM Association are working to break open the ultra-cheap phone market, other handset manufacturers are heading downstream as well. Sony Ericsson Mobile Communications L.P. plans to step up its competition by introducing more mid- and low-end phones in Europe, the United States and elsewhere. Sony Ericsson lately has focused on sales of sleek high-end phones like its W800 music device, gadgets that typically bring in higher profits but fewer sales.
“We’re going to expand to the mid and low end,” promised Jon Mulder, Sony Ericsson’s product marketing manager.
Although Mulder cautioned that the company would not enter the ultra-cheap handset market, Sony Ericsson’s moves are an acknowledgement that handset makers can no longer focus exclusively on the high-end market. Samsung Electronics Co. Ltd. too has said it will expand its focus beyond just the high-end market to sell more low-end devices.
