Ultra low-cost phones not so cheap

The ultra low-cost phones provided through the GSM Association (GSMA) /Motorola Emerging Markets programme have hit the South African market, but they are not retailing at the expected R180 per handset.

Last year, the GSMA awarded Motorola two contracts to ship ultra low-cost handsets, priced at under $30 (about R180), to take affordable communications to emerging markets such as Africa and Asia.

Motorola expects to ship over 20 million low-cost C range handsets into poor countries by the end of 2006. Ten operators in emerging markets, including Vodacom and MTN, have agreed to take part in the programme.

However, the phones are not reaching consumers at the expected low price. This month ITWeb visited national retailers Ackermans, CNA, Clicks, Dion, Jet and Pep stores to price the handsets in question.

The cheapest phone plan available through the programme was the C115i /MTN package, at Jet for R299. This package included a R200 MTN Pay As You Go starter pack, with R30 airtime. The offering was part of a soccer sponsorship promotion and available only for a limited period. The handset could not be purchased without the starter pack and airtime.

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The cheapest phone available that weekend was not a Motorola, but a Siemens/Cell C offering priced at R222, including a starter pack and R35 airtime.

Motorola says it has driven down handset prices as low as possible. However, Stephen Nolan, Motorola`s country manager in sub-Saharan Africa, concedes more can still be done to lower the overall price of the bundled package for the end consumer.

Motorola had envisaged that mobile providers taking part in the programme would be innovative when it came to SIM card connectivity, he says. While there are market development guidelines for operators taking part in the programme, there is no legal requirement for the operators to lower prices to a certain level. Motorola also cannot prescribe to providers how much they should charge, he says.

According to a Vodacom spokesperson, retailers are provided with a recommended retail price. However, Vodacom is not permitted to enforce final retail pricing as this can be seen as price fixing and is illegal.

The GSMA does not prescribe a final retail price but offers a single cost price to all operators across the globe, which is quoted in US dollars, Vodacom says.

"Each country`s exchange rate as well as import duty structure applies and this ultimately has an impact on the final retail price in the local market," says the company spokesperson. Other costing elements that impact on the final price of the GSMA mobile phones include import duties, shipping, national distribution and insurance, the company says.

The spokesperson also argues that the Siemens handset GSMA phones have been discontinued for at least a year. She says it is old stock that is being sold at lower than cost to move this older stock out of the market.

The emerging markets programme just started its journey in SA, Nolan says, and there is still a long way to go. "We should keep pushing, as we haven`t reached the millions of people in Africa who are unconnected," he says.

In a bid to promote the low-cost handset programme, Motorola will launch its Motobus road show this week.

MTN had not responded at the time of going to press.

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Low-cost handset programme extended