Ultra Low Cost Handsets: Securing New Subscribers in Emerging Markets

Executive Summary

ES.1 ULC handsets will significantly boost global subscriber growth

ES.2 Factors influencing the success of the ULC handsets strategy

ES.3 ULC handsets can bring benefits to all players in the wireless value chain

ES.4 Conclusions

Chapter 1 Introduction

1.1 Defining "Ultra Low-cost Handsets"

1.2 Challenges faced by ULC handset strategy

Chart 1: Handset Sales in Latin America by Handset Type (2002-2004)

1.2.1 Considerations for handset manufacturers

1.2.2 Consideration for mobile operators

1.2.3 Strategies Pursued by Handset Vendors in Emerging Markets

1.2.3.1 ULC handsets vs low-cost handsets

1.4 Approach of Analysis

1.5 Structure of report

Chapter 2 Strategic Overview

2.1 Mobile Networks: Coverage Statistics

Chart 2 Wireless Network Availability Worldwide (%)

Chart 3 Wireless Network usage Worldwide (%)

Chart 4 Wireless Network availability Worldwide (%)

2.1.1 Technology and market dynamics in emerging and developed nations

Chart 5 Worldwide Subscriber Growth for all wireless and GSM based technologies (2003-2010)

Chart 6 Penetration Levels across the World

Table 1 Mobile Statistics in developed countries

Chart 7 Share of Various Technologies (2003-2010)

2.2 GSM Association's EMH Initiative

Table 2 List of Member Operators in EMH Programme

Table 3 List of Countries with below average World Bank's GNI and less than 50% mobile service penetration

Table 4 Handset specifications for EMH programme

2.2.1 Why did GSM Association decide on the need for ultra cheap handsets?

Chart 8 Global Handset Market shipments (2003-2010)

2.3 Market Overview

Chart 9 Worldwide Subscriber Growth (2003-2010)

2.3.1 Saturation: A Key Issue

Chart 10 Population in selected countries worldwide (2004)

Table 5 Population figures for the top 20 most populated countries

Table 6 Mobile Penetration figures for selected emerging markets (2003)

2.3.1.1 Mature Markets

2.3.1.1.1 Mature Market Statistics

Table 7 Mature Market Facts and Statistics

Chart 11 Subscriber CAGR in Emerging and Mature Markets (2005-2010)

2.3.1.2 Emerging Markets

Table 8 Increasing Mobile Penetration levels in Emerging Markets (2003-2004)

2.3.1.2.1 Subscriber Growth in Emerging Markets

Chart 12 Increase in Wireless Penetration in China and India

2.3.2 Key Statistics of Emerging Markets

2.3.2.1 Penetration Rates

2.3.2.2 Growth Opportunities

2.3.2.3 Subscriber Profiles

2.3.2.4 Why can handsets not be subsidised as they are in the western world?

2.3.2.5 Pricing plans pursued by Operators

2.3.2.6 Current Handset Availability

2.4 Description of the Major Markets for Ultra Cheap Handsets

2.4.1 China

2.4.1.1 Market Structure

2.4.1.1.1 Competition

Table 9 China Market Statistics (2000-2004)

Chart 13 Subscriber Growth in China (2002-2010)

2.4.1.2 Market Development

2.4.1.3 Subscriber Growth

2.4.1.3.1 Penetration Climbs

2.4.1.4 China remains a favourite market for the Handset Manufacturers

2.4.1.4.1 Is there significant potential for low-cost handsets in China?

2.4.2 India

2.4.2.1 Market Structure

Table 10 Key Mobile and Economic Statistics of Indian Market

2.4.2.2 Focus on Rural Demand

Table 11 Key players and services offered

2.4.2.3 Demographics

2.4.2.4 Why is there a Huge Demand for Ultra Low-cost Handsets in India?

2.4.2.5 Future Growth Potential

Chart 14 Increasing Wireless Penetration in India

Chart 15 Estimated Subscriber Growth in India (2003-2010)

2.4.2.6 Is there a market for Ultra Low-cost Handsets in India?

2.4.2.6.1 Challenges faced by ULC handsets in India

2.4.3 Russia

2.4.3.1 Market Size/Penetration

2.4.3.2 Competition

2.4.3.3 Visiongain's outlook

Table 12 Russia's key mobile and economic data

Chart 16 Increasing Mobile Subscribers in Russia, 2000-2004

2.4.4 Other Countries

Table 13 Regions and Countries that will drive Mobile Growth

2.4.4.1 Africa

Chart 17 Africa's Mobile Subscriber Growth, 2003-2010

2.4.4.2 Middle East and North Africa

2.4.4.2.1 Iran

Table 14 Iran's Statistics

2.4.4.3 Brazil

Table 15 Brazil's Statistics

2.5 Operator Demands' in Emerging Markets

Chapter 3 Handset Vendor Landscape in Emerging Markets

3.1 Handset Vendor Dynamics

Table 16 List of Main Vendors in the Handset Market

Chart 18 Market Share for Main Handset Vendors in 2004

3.1.1 Handset Vendor Statistics

Chart 19 Sales of Replacement Handsets (2000-2010)

Chart 20 W-CDMA Subscriber growth (2002-2010)

3.2 Nokia

3.2.1 Poor Strategic Planning

3.2.2 Nokia's Ambition

3.2.3 Reluctance to Customise

3.2.4 Nokia long interested in low-end handsets

3.2.5 Can Nokia revamps itself with an Emerging Market Strategy?

3.2.5.1 Nokia to use Nanotechnology to cut handset costs

3.3. Motorola

3.3.1 Motorola's Market Share

3.3.2 Motorola's Strategy in Emerging Markets

3.3.3 Motorola is increasing challenges for Nokia

3.3.3.1 Focus on India

3.3.3.2 Focus on China

3.3.4 Broad Product Portfolio for emerging markets

3.4 LG Electronics

3.4 1 LGE's Handset Strategies for the Emerging Markets

3.4.2 Investments in China

3.4.3 Strategies in India

3.4.4 Market Focus

3.4.4.1 Manufacturing in India

3.4.5 LG's Ambitions

3.4.5.1 LG's position towards pursuing the ultra low-cost strategy?

3.5 Sony Ericsson

3.6 Samsung

3.7 Siemens

3.8 Ningbo Bird

3.8.1 Partnership with Siemens

3.8.2 Chinese Government's incentive

3.9 Other Chinese Companies

3.10 Other Companies

3.10.1 Hop-On

3.10.2 MCorp Global

Chapter 4 Vendor Issues and Strategies with ULC handsets

4.1 Issues Facing Vendors

4.1.1 Is it Viable to Pursue the Low-cost /Ultra Low-cost Handset strategy?

Chart 21 Falling Average Handset Prices Worldwide (2003-2007)

4.1.2 How to Make Customisable Handsets

4.1.3 How to Realise Economies of Scales?

4.1.3.1 Cost Leadership

4.1.3.2 Operational Excellence

4.1.4 Portfolio Strategies

4.1.4.1 Segmentation in emerging markets demands a cohesive ULC/high-end handset approach

4.1.5 Brand Management

4.1.6 Dealing with Competition

4.1.7 Promotion

4.1.8 Partnerships and Alliances

4.1.9 Robust Product

4.2 Competitive Forces

4.2.1 Reducing the threat from substitutes

4.2.1.1 Second Hand Handsets

4.2.1.1.1 Re-Cellular

4.2.1.2 Threat from low-cost Handsets

4.2.2 Threat from New Entrants

4.2.3 Threat from Competition

Chart 22 Falling Handset Profit Margins, 2003-2005

4.2.4 Threat from Buyers (Network Operators)

4.2.5 Threat from Suppliers

4.2.5.1 Qualcomm predicts cheap 3G handsets

4.3 Analysing the Macro Environment

4.3.1 Political Factors

4.3.2 Economic Factors

4.3.3 Social Factors

4.3.4 Technological Factors

4.3.5 Environmental Factors

Chapter 5 ULC Handset Strategies for Operators

5.1 Promote Service Uptake

5.2 Improving coverage and capacity of networks

5.2.1 Role Infrastructure Providers can play in service uptake

5.2.1.1 Ericsson's Infrastructure strategy

5.2.1.2 Siemens solution

5.2.1.3 Motorola's Solution

5.2.1.4 Other New Entrants in Infrastructure Industry

5.3 Segmenting and targeting the profitable customer segments

5.3.1 Flexibility and Adaptability

5.3.2 Choosing services that will benefit the low ARPU customers

5.3.3 Promotion

5.4 Pricing Strategies

5.5 Market Focus

5.6 Gaining Competitive Advantage through Effective and Efficient Operations

5.7 Other Essential Tactics

Chapter 6 The Future of ULC Handsets

6.1 Critical Success Factors for the Ultra low-cost Handset Strategy

6.1.1 Understanding Customer Requirements

6.1.2 Realising Economies of Scale

6.1.3 Positioning and segmentation

6.1.4 Capacity and Distribution

6.1.5 Open Standards

6.2 Key beneficiaries of this industry-wide initiative

6.2.1 Operators

6.2.1.1 Vodafone

6.2.2 Chip Manufacturers

6.2.2.1 Qualcomm

6.2.2.1.1 Qualcomm explores revenue growth through low-cost handset opportunities in Emerging Markets

6.2.2.1.2 Texas Instrument

6.2.3 Other players in the value chain

Chapter 7 Market Forecasts and Conclusions

7.1 Conditions for Success

Figure 1 Factors influencing the Success of Ultra Low-cost Handset Strategy

7.1.1 Cheaper handsets are only one part of vendor's product portfolio

7.1.2 Survival of the fittest

7.1.2.1 The Big Players

7.1.2.2 Other Players

7.2 Forecasts

Chart 23 Ultra Low-cost Handset Shipments (2005-2010)

Chart 24 Ultra Low-cost Handset Shipments by Region (2005-2010)

Chart 25 Vendor market shares in Ultra low-cost Handsets (2006)

Chart 26 Ultra Low-cost Handset Vendor Market Share (2010)

Chart 27 Falling Prices of Ultra Low-cost Handsets (2005-2010)

7.3 What kind of Handsets will be on offer?

7.4 Comparison Between Emerging and Mature Markets

Chart 28 Subscriber Growth in Selected Markets

Chart 29 Service Revenues from Selected Countries

Table 17 Net Subscriber Additions in Emerging and Mature Markets (2004-2010)

Chart 30 Comparison between Smartphone Shipments Worldwide vs Ultra Low-cost Handset Shipments in Emerging Markets (2004-2010)

7.5 Cost and Profit Margin Analysis

7.5.1 Profits to Operators

Chart 31 Cost and Profit analysis for Network Operators

7.5.2 Profits to Vendors

Table 18 Bill of Material (BOM) for an Ultra Low-cost Handset

Chart 32 Falling BOM for Ultra Low-cost Handsets (2005-07)

Chart 33 Profit Margins in Ultra Low-cost Handset Segment

7.6 Conclusions

Table 19 Criteria for Success

Appendix A About visiongain

Appendix B Report evaluation form

Companies and organisations mentioned in the report

AIS

Bharti

BPL Cellular

BSNL

China Mobile

China Unicom

DBTel

Fujitsu

Global Telecom

HP

Huawei

Hutchison Essar

Idea Cellular

Kyocera

LG

Matsushita

Maxis

Megafone

Mitsubishi

Mobifone

Motorola

MTNL

MTS

NEC

Nextel

Ningbo bird

Nokia

Orascom

Oskar

Panasonic

ReCellular

Reliance Mobile

Qualcomm

Sagem

Samsung

Sharp

Siemens

Singtel

Skylink

Smart

Sony

Sony Ericsson

Spice Communications

Svyazinvest

Tata teleservices

TCL

Tele services international wireless

Telenor

Telsim mobile

Texas Instruments

Turkcell

Vimpelcom

Vodafone

ZTE