BARCELONA Feb 27 The next billion people to
connect to the internet in developing countries will do so
largely via smartphones, prompting a battle that could favour
low-price Chinese manufacturers like Huawei and ZTE over market
leaders Samsung and Apple.
Fixed-line telephone networks are often weak in emerging
markets and building new ones is expensive, and so smartphones
are becoming a vital way to connect populations to the web and
bolster economic growth.
Consumers in markets from Nigeria to Indonesia are hungry
for features now standard in the United States and Europe that
allow them to tweet or watch video on the go.
The challenge for smartphone makers is offering those
features at a price local populations can afford.
Manoj Kohli, chief executive of Indian operator Bharti
Airtel, said emerging market consumers were ready to
leapfrog basic phone models and go straight for smartphones, but
that prices could not come down fast enough.
"People in the developing world are going straight to the
mobile Internet," he said in a keynote session at the Mobile
World Congress in Barcelona.
The focus on low-price smartphones could step up the
challenge to market leaders Apple and Samsung
, which are best-known for their top-end iPhone and
Galaxy S3 models.
Lenovo, known for its PC business, has quietly
become the fifth-biggest smartphone maker in the world by almost
exclusively focusing on a single market: its home country China.
It is now expanding into Indonesia, India and Russia in a
bid to appeal to the rising middle classes there.
And Huawei and ZTE have built share by
bringing features pioneered by Apple and Samsung such as touch
screens, fast processors and better cameras to the market at
prices around $100.
The opportunities in emerging markets appear huge.
Just 4 percent of Africans had smartphones in 2012,
according to research group Informa. The figure was slightly
higher at 11 percent in the developing countries in the Asia
Pacific region. In comparison, North America had the highest
take up of web-connected phones, at 47 percent.
Between 2012 and 2017, telecoms consultancy Ovum expects
that there will be 1.6 billion new mobile connections across the
world, with 61 percent of these coming from Asia-Pacific. Africa
will be the fastest-growing region, with mobile connections
growing at a compound annual rate of 6.5 percent.
Lenovo's Chief Executive Yang Yuanqing said strong price
competition among Chinese players had resulted in a smartphone
boom in the country of 1.3 billion. Of all the phones sold in
2012, he said 70 percent were smartphones, and he's looking to
repeat the trick elsewhere in Asia and Russia.
"We have been very successful in China, so we know how to
win in emerging markets," he told reporters.
"In a mature market you need to build a very strong
relationship with the carriers so they can give you a subsidy,
but in emerging markets you can sell in the open market."
He pinpoints a problem for the big players. Top-end devices,
like the iPhone and Galaxy S3 attract subsidies from network
operators in Europe and the United States, hiding the cost of
around $500-600 over a two-year contract. Such deals are much
harder to find in emerging markets.
The result of a lack of subsidies means the appeal of a
phone largely comes down to its upfront cost, which combined
with the Chinese companies' growing ability to match and in some
cases surpass the technical specifications of the market
leaders, could prove troublesome for Apple and Samsung in
Ben Wood, chief of research at CCS Insight, said the Chinese
players, which also include TCL Corp, were already raising
concerns at Samsung, which leads the Chinese market.
"If Samsung is worried, you've got to imagine that Nokia is
terrified," he said. "The Chinese companies can find enough
volume in the Chinese market to sustain the volumes they need
and the money they need to keep pushing internationally."
Companies like Nokia, Samsung and Apple are not
standing still, however.
Nokia, which has for years been strong in emerging markets
with basic devices, is introducing new lower-priced phones with
email and basic web browsing to target consumers in Africa and
Asia-Pacific countries in particular.
At the same time, though, Chinese manufacturers like Huawei
and ZTE are trying to shake off their copycat reputations by
introducing marketing slogans and top-end devices in Barcelona.
Huawei's Ascend P2 is billed as the fastest smartphone on
the market, and has other innovations, such as power saving
technology, priced at 399 euros.
Wan Biao, chief executive of Huawei Device Co, said the high
innovation level in the Ascend P2 had already started to attract
the attention of operators.
France Telecom's Orange appeared on stage at the
launch. It will sell the device in France from June 2013.
The operator's VP of devices, Yves Maitre, said Orange was
placing a bet on Huawei just as it had in the past with Apple