Safaricom has launched the cheapest smartphone that runs on Google’s Android operating system in partnership with Chinese technology firm Huawei as its races to get a larger share of the Internet market.
Retailing at Sh8,499, the Huawei IDEOS U8150 will be the cheapest smartphone in the Kenyan market and is expected to deepen the penetration of Internet among the estimated 17 million Safaricom subscribers.
The smartphones market is dominated by highly-priced models with most of them retailing at above Sh25,000 placing them above the reach of the majority of consumers.
For Safaricom, the availability of affordable Internet-enabled products is crucial in its struggle to reduce dependence on the voice market that is gripped by price wars.
The listed mobile telephony firm is now looking at the data business to maintain its profitability.
“It does not make sense to talk of data as the next growth revenue while low end users cannot affordable Internet-enabled laptops and handsets,” said Bob Collymore, the Safaricom CEO in an interview. “We are facing stiff competition on voice and not data. As a result, we intend to bring affordable Internet accessories to end users.
This is captured by the partnership that saw Safaricom and Huawei and subsidise the IDEOS Smartphone by more than 40 per cent.
The phone is retailing at Sh14, 999 in the foreign market and the discount is aimed to move the product to the low end market and boost uptake on Internet at the bottom end of the economy.
Voice is Safaricom’s biggest revenue earner accounting for 76.2 per cent of Sh47.1 billion half year revenues with the remaining share taken by data business including SMS, M-Pesa and Internet.
But the decline on the Average Revenue Per User (ARPU) on the voice segment following tariff reduction by rivals has shifted focus to data services which have bigger headroom for growth, with a national penetration of less than 10 per cent.
The cost of voice calls fell to a low of Sh1 last week after Safaricom rival Airtel cut prices from Sh3 per minute, which come down from about Sh6 in August, more than halving each subscriber’s monthly budget for airtime.
Mr Collymore said Safaricom will not cut its prices despite the onslaught from rival Airtel, arguing the rates are not sustainable and could hurt the industry.
No price cut
“We cannot give away our profitability because of the market share,” said the CEO, adding that the data business will help cushion the voice business.
This has seen Safaricom intensify its activities in this segment of the business by buying rival Internet firms to give a head start over starting operations from scratch and is rolling out the advanced 3G network that allows for faster Internet transmission.
The IDEOS is a touch-screen phone that comes with bluetooth connectivity and transfers data of up to 7.2 mega bytes per second.
It has QWERTY or computer like keyboard, full and faster Internet access and one can edit documents and spreadsheets unlike the conventional phones.
The IDEOS is the latest in a string of devices the Chinese firm has rolled out aiming to capture a share of the growing Internet market and grab market share from other dealers including Nokia, Motorola and Samsung, firms finding it difficult to match the Chinese brands on pricing.
The Chinese telecom giant has made inroads in the telecoms infrastructure market that was previously the domain of European based brands such as Erickson, Alcatel and Siemen.
The firm has been involved in infrastructure upgrade projects at Telkom Kenya and Safaricom.