Cheap and cheerful

Mobile handset sales in emerging markets across the Middle East and Africa are booming, with the region’s top cellular service providers teaming with the world’s biggest handset vendors to tap commercial opportunities across the region.

The biggest growth in demand has been for low- cost handsets predominantly developed by Motorola and Nokia, two companies which have placed the emerging sub-sector at the forefront of their respective global growth strategies.

Both vendors are bridging the ‘digital divide’ by manufacturing low- cost handsets equipped with applications to meet the specific consumer demands of these developing markets.

Nokia, the Finnish-based mobile handset giant, has entered into these markets via new regional offices scattered across the Middle East and Africa which has seen it also expand its workforce in the region tenfold in the last year as it aims to overhaul its sales and redistribution network.

Armed with a 12-strong entry-level product portfolio, Nokia has quickly consolidated its presence in the sector by stressing the user-friendly nature of its handsets to first-time buyers in emerging markets.

According to Sudhir Nair, Nokia’s senior marketing manager in the Middle and Near East, the company’s entry-level product line includes the Nokia 1112, 2310 and 2610, which have been designed for consumers looking to purchase their first handset???.

Realising the importance of this sub-sector, Nair also highlights the need for distribution and retail networks to mature??? in order to maintain the sustainability of operating in emerging markets.

The key challenge is that the market needs to mature from a wholesale-driven model to retail. This will only happen as more malls and high-end retailers establish stores in these markets.???

Anticipating this trend, Nokia ‘s entry-level portfolio includes products with high-spec applications. The Nokia 2610 offers iconic design and a strong range of features for business-minded consumers,??? explains Nair.

A first for entry-level handsets, the 2610 includes e-mail support as well as mobile internet access, e-mail support and internet access via a WAP browser.???

Nokia is not alone in acknowledging the potential of this market. Indeed, a strategy combining rapid product roll-out supported by savvy marketing has seen archrival Motorola snare an 80% share of the market for ultra-low cost handsets priced below US$40.

In this region, we are seeing the strongest growth in the entry level handset market. Expanding our presence in this segment is key to the overall growth of our business,??? says Haroud Radossian, Motorola’s regional sales manager for the Lower Gulf. Our strategy is based on ‘connecting the unconnected’.???

In an earlier interview with ECN, Hassan Alex Tavakoli, vice president of Motorola Middle East and Africa, confirmed that these markets remained at the forefront of the company’s growth strategy worldwide.

The emerging markets are hugely important to the growth of our business and the Middle East and Africa are two of the world’s biggest examples from this perspective,??? he says.

This region really represents the ‘sweet spot’ for our handset business worldwide. Our long-term strategy for the Middle East and Africa will ultimately influence our overall sales results globally.???

With a product portfolio that incorporates basic voice-centric handsets to entry-level Video Graphics Array (VGA) camera-equipped phones, Radossian stresses that Motorola’s lower- cost handsets are manufactured to the same standards as its premium models.

We have several lower cost handsets ranging, from the basic voice-centric models to the colour-screen and entry-level camera phones,??? he says.

Our entry level models boast several innovations, such as premium display technology. This has enabled us to bring the cost of the product down to facilitate the segment of the market that we are targeting.???

Motorola has realigned a portion of its production capabilities to focus on producing handsets specifically for the developing world. Key to this has been its C-11X series of handsets that will be updated in 2007 to include the ultra slimline Motophone range.

According to Tavakoli, the C-11X range remains the company’s biggest selling model in the Middle East.

One of the key selling points of these products is the voice-driven menu which features as standard,??? explains Radossian. In other words, the menus are not in text there is an icon with a voice that explains the function of each profile. The idea is to make it easier for consumers to interact with the phone and access its features.

These products will be heavily promoted in countries with high illiteracy rates such as Algeria, Egypt, India, Morocco, Pakistan and many of the African countries.???

The lack of telecommunications infrastructure in developing countries also poses significant challenges to handset manufacturers, resulting in the companies searching for ‘alternative’ partnerships often with distributors with little to no prior involvement in the mobile handset channel.

In these markets we are basically trying to reach people who don’t have access to landline phones,??? says Radossian.

Some of the logistical problems lie in the geographical remoteness of the areas that we are targeting.

Our strategy is to tie-up with companies that are not necessarily in the telecommunications business. We look to establish deals with distributors that boast reliable distribution channels in a particular country.???

Motorola’s efforts demonstrate the importance of emerging markets to the company’s overall strategy for achieving sustainable growth in the Middle East and Africa.

Its refusal to compromise on quality, combined with its commitment to maintaining low prices, reflects its view that emerging markets are key to realising its ambition of snaring the top spot in the global handset market from archrival Nokia.

The profit margins in the entry-level sector are less than those in the high-end markets but this is part of our two-tier strategy,??? concedes Radossian.

The low- cost products are used to gain market share whereas our premium products help to maintain a healthy profit margin.???

Nokia’s Nair admits the company is pursuing a similar strategy designed to ward off competitive threats to its dominance in the handset market.

We believe that handset sales still have huge growth potential worldwide, but the vast bulk of this growth will be realised in emerging markets,??? he says.

Source-  itp  Wireless Mobile Telecom