Windows Phone prospects in the developing world

Nokia's Lumia 610 faces entrenched opposition in the developed world. But, in developing markets, where the Nokia brand is strong and a decision about which platform to favor has not been made, it is on firmer footing.
Written by John Carroll, Contributor

The Mobile World Congress is taking place in Barcelona this week, and on Monday, Nokia announced the release of the Lumia 610, the "low-end" addition to the new, Windows Phone OS-running "Lumia" line inaugurated as a result of Nokia's partnership with Microsoft. Priced at €189 euros (or $250) without carrier subsidy, it is clearly aimed at helping Nokia maintain its sales lead in the developing world.

It has a considerable lead in Kenya, where I am right now the week after attending the Mobile Web East Africa conference (#mwea2012 on Twitter). The top 5 phones sold in the Kenyan market were all Nokia devices. These were of the "feature" variety (the exact models were listed in a presentation that I will find once they post the presentations), and wouldn't fall into the Smartphone category.

Nokia is under pressure in this segment, mostly from Chinese handset manufacturers such as Huawei and ZTE who are adept at creating phones at the price points that the average Kenyan can afford.

Their brand, however, is strong, which helps somewhat, particularly given the quality standards normally associated with Nokia devices. Mobile handsets are expensive for those on low incomes, and the need to buy a device that can survive under harsh conditions favors the brand most associated with high quality levels. Nokia is that brand.

However, it is the smartphone category where Nokia is having the most difficulties. iPhone is a non-issue for Nokia in Africa, as the devices often cost twice what they do in developed markets, thus putting them beyond the reach of most (though among those who can afford it, Apple products are very popular). The platform that has made the most inroads from a platform standpoint is, not surprisingly, Android - a platform whose low cost (free) and open source nature is well suited to cost-cutting efforts.

Specifically, the device that is putting the most pressure on Nokia is the Huawei IDEOS U8150. Originally retailing for Ksh 14,999 when it was rolled out by Safaricom during the 2010 Christmas season (or $180, a price that matters more than it does in the US, as carriers in Africa almost never subsidize phones), it now retails for Ksh 7,999 (or $100). Sales have been strong, accounting for over 300,000 devices sold in 2011, or 45% of the market for smartphones.

Those familiar with the volumes of smartphones sold in developed world are probably suprised that 300K+ is considered "strong." Safaricom, the largest carrier in Kenya with around 80% of the market, has around 16 million subscribers. Of those, only around 10% have smartphones, according to an engineer to whom I spoke. Only 25% have a data plan for their phone (usually prepay data, which is common in Kenya), thus limiting demand for a phone that works best with a data plan.

So, for Huawei to sell 300K+ smartphones, it means the total smartphone units sold in 2011 was around 667K. That's 4% of the Safaricom subscriber base, and half of the total number of smartphones currently on the Safaricom network. This is in spite of build quality issues that various bloggers have noted (several of our test devices at ForgetMeNot Africa have back plates that won't reattach properly after little use, and battery life is a mere 4 hours with 3G data (6 hours with 2G data).

Therein lies the opportunity for Nokia. According to Simeon Oriko, Community Lead at iHub, a technology meeting point in Nairobi, most Kenyans (or most Africans, for that matter, as Kenya is ahead of most of the rest of Africa in terms of use of mobile data) haven't made a decision about which smartphone device they favor. They do, however, have great experience with the build quality of Nokia devices. As they start to consider which smartphone device to purchase, they are naturally inclined to favor Nokia smartphones.

That provides Nokia a tremendous leg up in terms of attracting users to Windows Phone-based Nokia devices, provided they can roll out product at a price that users in Kenya can afford. The Lumia 610 looks to be Nokia's attempt to do that.

Granted, the device is still quite expensive, list-price wise, but then again, so was the Huawei IDEOS. Economies of scale will help to drive the price lower. The trick was pushing the platform to a point where low-end devices featuring a high-end operating system become possible. If they can maintain build quality as the price drops with scale, they can justify a premium over the IDEOS.

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