The numbers don’t look good for mobile operators right now. In their most recent annual results, MTN reported group revenue up 5%, running below inflation in South Africa. Vodacom’s latest quarterly results showed marginally higher growth, at 5.8%, almost catching up with inflation.
The challenge that has faced operators for several years now – as voice revenues plateau and rising data revenues don’t rise fast enough to replace the voice slowdown – has been to find new revenue streams. Very quietly, they have been doing just that in the handset arena, with MTN punting the locally manufactured Mint devices and now getting behind the rising Chinese brand Xiaomi.
Vodacom has taken a far more aggressive approach to this strategy, rolling out a wide range of devices under the brand of its parent company, Vodafone. Alcatel manufactures Vodafone-branded smartphones by virtue of winning a tender that is put out from time to time. However, it’s not merely a matter of being able to make the phones most cheaply.
Alcatel has proven itself at both the entry-level, with its sub-R600 entry-level smartphone, the Pixi – which has at times been the top-selling phone in southern Africa – and its mid-range Idol phones. This year, it also introduced the Go Play and Pop Star ranges, aimed respectively at active and youth markets. That cements it as a technology leader in the segments where operators see the biggest opportunity for their own brands. They can’t compete at the high end with the likes of Apple and Samsung, or even Sony and LG, whose brands are associated with both the highest quality and the top specifications available.
However, the real volume in emerging markets comes from mid-range phones costing anywhere from R2 000 to R8 000, and entry-level phones costing less than R1 000. These are usually not the most profitable phones, as their margins are much lower than those of the big brands’ flagship devices. However, by taking out the cut that goes to the big brands, the cheaper phones suddenly become much more profitable.
In the financial year ending March 31, Vodacom sold 6.5 million smart devices, of which 25% were Vodafone branded – up from 16.8% a year before. The growth in revenues from this division marginally outpaced overall revenue growth. This sets the stage for the next big growth spurt in device sales from Vodacom, as it makes the transition away from non-smart handsets.
In the year to March, almost 4 million of its 10.4 million device sales fell into the latter category. In the next year, that segment will begin to vanish as the new range kicks in. However, the big surprise comes from the flagship phone, the Platinum 7. It’s 16MP rear camera produces photos as good as anything outside of the Samsung S6 and S7 devices.
Those cost almost twice as much, so one would expect their images to be better, but many other phones costing far more than the Vodafone flagship phones cannot match its image sharpness. While the phone itself is slow, it is ideal for someone who wants a phone for the camera quality but cannot afford one that is the top of other manufacturers’ ranges.
The new devices from Vodacom include:
1. Vodafone Smart Platinum 7 LTE smartphone
The flagship Vodacom phone, retailing at a recommended price of R8 509, will be available on a 24-month contract at R399 per month. Customers will also get a Smart VR basic virtual reality headset and a free one-year subscription to Microsoft Office 365, which includes a licence for three devices and 1TB of cloud storage.
2. Vodacom Smart Ultra 7 LTE smartphone
The budget alternative to the platinum, at R3 539 for purchase, and R199 per month on contract. It also comes with a one-year Microsoft Office 365 licence for three devices, with 1TB of cloud storage.
3. Vodacom Smart Prime 7 LTE smartphone
The entry-level, big-screen smartphone at R1 799 outright and R129 per month. Also with Microsoft Office 365 licence for three devices and 1TB of cloud storage.
4. Vodacom Smart Kicka 2
The best value entry-level smartphone on the market, at R499 outright or R59 a month. The Kicka is the standout device here. Given the poor exchange rate, it is an absurdly cheap phone, with a powerful quad core processor, 1400 mAh battery, 2Mp camera and 4GB storage, expandable with a micro SD slot. It runs Android 5.1, which just a couple of years ago would have made it a cutting-edge phone.