Feature phones are the smarter choice for emerging markets

With smartphones increasingly prevalent in developed markets, demand for the services they offer is rising in emerging markets too – but pricing can be prohibitively expensive. Carsten Brinkschulte, CEO of messaging software firm Synchronica, believes it’s not specific devices that are coveted, but their functionality – and this is why feature phones are on the rise in emerging markets. Developing Telecoms editor James Barton caught up with Carsten Brinkschulte to discuss this trend.

DT: As emerging markets are moving beyond budget handsets and demanding more sophisticated devices, which types of phones are prevailing in emerging markets?

CB: Feature phones are becoming the strongest platform of device sales in emerging markets, at the cost of standard phones. Smart phones do not yet play a significant role, at least not in the poorest emerging economies, but feature phones are undergoing strong growth. They are beginning to add functionality typically associated with smartphones – web browsing, instant messaging, push email and connectivity with social networks. Essentially, we are seeing feature phones ‘assuming the responsibility’ of smartphones by integrating functions that users would typically associate with smartphones.

DT: So what kind of services are these phones offering?

CB: The dominant feature phone platform worldwide is Nokia’s Series 40 – this series represented around 20% of all handsets shipped globally in the second half of 2010, and these handsets come bundled with push email, instant messaging and social networking connectivity. It’s clearly a model with a big market share – bundling infrastructure and software with the handsets to offer smartphone-like functionality.

DT: Do you see that as a trend evolving across emerging markets then – will the feature phone market develop as its own separate field, or will smartphones replace feature phones at any point?

CB: Depending on how far you want to look into the future, over time smartphones will of course take a significant market share in developing countries and will probably become the majority eventually, but how long that would take can be difficult to predict – it could be anything from three to five, even ten years before we see smartphones taking a dominant position in developing countries. One Latin America carrier group has informed us that in their installed base across the continent, smartphones accounted for just 5%. That’s dramatically lower than what you’d see in the USA or Europe, meaning that the adoption rate of smartphones is still very low, and Latin America is relatively more developed than Africa, so it would be fair to assume that the African penetration rate would be significantly lower.

DT: So there’s currently not much of a market for smartphones?

CB: There would be if the price of handsets was more appropriate for the market, but of course at the moment smartphones are typically priced at over $150. There has been a lot of talk about the $100 or sub-$100 smartphone, but as far as I’m aware no such product has materialised. Android has helped to lower the average cost of smartphones, and we have seen the first lower cost smartphones, but from the perspective of Africa or India for example, the ‘low cost’ smartphones are still extremely expensive so do not play a significant role in the mass market.

DT: Do you think that there’d be an eager audience for an ultra-low cost smartphone?

CB: Of course there would be theoretically, but I would suggest that actually the feature phone is very well suited to play that role. The definition of a smartphone can be difficult as it’s typically associated with functionality; if a feature phone can provide that functionality then that’s essentially a low cost smartphone – does it really need Android to warrant the name? From an end user’s perspective, what you can actually do with the handset is more important than if it is called a smartphone or a feature phone, and now higher-end feature phones are providing smartphone-like functionality, which is the key reason for which most people would buy a smartphone.

DT: Apart from the prohibitive prices, what are the other factors preventing the spread of smartphones in emerging markets – is their functionality considered a luxury rather than a necessity?

CB: Many smartphones are quite difficult to use due to their overwhelming arrays of functions; a feature phone can have an advantage of a reduced and more focused user experience which may be more suitable for some of the user segments within the emerging economies.

DT: Would you expect mass deployment of smartphones to take off in emerging markets?

CB: Eventually yes, but I believe it will be at least five or six years before smartphones have an installed base penetration rate of 20 – 30% in most emerging economies. In a market like Latin America – combining Telefonica and America Movil that’s 400 million subscribers between them – if each of them ships 20 million smartphones into the region, it will take several years before those phones have a significant market share on a cumulative basis within the installed base.

Often analysts confuse the new device sales market share with the installed base market share. It takes a lot of time before the installed base fills up with new handsets shipping into the market, as the amount of devices entering these markets is typically very small.

Sign-up to our weekly newsletter

Keep up-to-date with all the latest news, articles, event and product updates posted on Developing Telecoms.
Subscribe to our FREE weekly email newsletters for the latest telecom info in developing and emerging markets globally.
Sending occasional e-mail from 3rd parties about industry white papers, online and live events relevant to subscribers helps us fund this website and free weekly newsletter. We never sell your personal data. Click here to view our privacy policy.