Low-cost units lift firm to new heights

THE evidence mounts that the cellphone industry is being transformed from the bottom up. This week TLC Communication, manufacturers of Alcatel One Touch phones, released results for the first nine months of this year that revealed not only its own aspirations of playing among the market leaders, but also the dramatic shift from basic phones to entry-level smartphones.

Alcatel announced it had sold 48.6 million phones globally during the period, showing a 35% increase over the same period last year. More significant, however, was the fact that smartphones made up more than half this number, at 25.9 million units — representing an astounding 162% growth over last year.

For the Europe, Middle East and Africa region, Alcatel smartphone sales grew 112%, to nine million units — also just over half of total phones sold in the region.

In South Africa, where Alcatel is primarily known for its basic, low-cost phones, the transformation is far more dramatic. While its unit sales doubled in the first nine months of the year, its smartphone sales have seen an almost absurd proportional growth.

According to country manager Ernst Whittman, half a million Alcatel feature phones were sold in South Africa in 2013, along with just under 100 000 smartphones. For the first nine months of this year, the overall total has passed the 800 000 mark — and 700 000 of those are smartphones.

“That shows how quickly we have evolved from feature to smart phones,” said Whittman. “A lot of that is thanks to what operators have done in driving down the cost of data, and then driving up the acquisition of data customers by subsidising entry-level handsets.”

The process began at the beginning of 2014 with the launch by MTN of its Steppa smartphone at below R500. Those were quickly sold out, and Alcatel stepped in with the Pixi 2, an Android smartphone retailing at below R600.

Vodacom also took up the Pixi, along with its own branded phone, the Kicka, manufactured by Alcatel. Both have proved to be successful.

“So between the two major operators, we’ve seen major growth,” said Whittman. “It’s greatly assisted us in going from a 3% share of the entry smartphone sector to just under 14% in nine months.”

Alacatel’s success story is closely intertwined with that of Pep Stores, which sells almost half of all cellphones bought in South Africa. With its entry into the Zambian market, it has taken Alcatel along for the ride. The top-selling devices there are the Pixi 2 and a BlackBerry--

Alcatel’s global smartphone sales are 162% up on the same period last year

style feature phone, the Tribe 3003.

Beneath the Alcatel results lurks another quiet entry into a fast-evolving market. The company’s low-cost 7-inch tablet, the unheralded Pop 7, was the top-selling tablet on the Vodacom network in July and August. So far about 100 000 of the devices have been sold in Southern Africa.

If that makes it look like a pure emerging-market play, it’s worth looking at the numbers elsewhere. Alcatel recorded 57% revenue growth in the US, and was ranked by Gartner as the third-largest mobile brand in Latin America by the second quarter of 2014.

The bottom-up approach does not yet threaten the high-end players, but we are probably seeing another big change coming: in the positioning of a brand that will no longer be lurking below the radar.

Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter on @art2gee and on YouTube