Arthur Goldstuck: Low-cost smartphones changing the playing field in SA

As the face of the global environment is changed by smartphones, so too is the face of Africa and the way in which it interacts with technology. Although South Africa has one of the most advanced financial sectors on the African continent, it does not have the highest smartphone and internet penetration on the continent. Where countries like Kenya and Nigeria are ahead of us when it comes to the use of smartphones and the internet, we are catching up. MTN and Vodacom are bringing groundbreaking changes to the accessibility of the smartphone in South Africa, with the launch of smartphones for around R500. The economic and social impact of access not only to smartphones, but to instant internet is a game-changer. This exciting development was broken down by Arthur Goldstuck, MD of Worldwide Works, who joined Alec Hogg in CNBC Africa’s studio on the Power Lunch.  – LF

GUGULETHU MFUPHI:  Well, aimed at the low end of the market, Vodacom launched a Smartphone for just R549.00.  Arthur Goldstuck, MD of Worldwide Works and Editor-in-Chief of Gadget joins us now for more.  Arthur, it’s good to have you with us.  There are lots of gadgets here that you have with you on the table, but let’s maybe pick up on this one from Vodacom.  I understand it’s in direct competition with what MTN recently launched.

ARTHUR GOLDSTUCK:  This is the Kicka.

ALEC HOGG:  It looks like my iPhone.

ARTHUR GOLDSTUCK:  It looks like almost anyone’s Smartphone.  It’s a smaller screen, though.  That’s partly what makes it so cheap, but there’s a massive competition underway between Vodacom and MTN to bring the cheapest Smartphones to the market although they say it’s not about competing, but about trying to give their entry-level customers entry to the Internet world and the world of data and apps.

ALEC HOGG:  Have you compared the Steppa and the Kicka, because the Steppa is MTN’s?

ARTHUR GOLDSTUCK:  This is the Steppa from MTN and that phone was really one of those that set the market alight because it’s a R499.00 phone as opposed to the Kicka at R549.00.  The problem with the Steppa though, is that it has MTN’s own skin over the Android operating system and the skin means it’s their version of the operating system.  It’s not a very user-friendly one, whereas the Kicka has almost a standard version of Android, so people will be able to get far more use out of the Kicka.  MTN have now come up with a new version of the Steppa (not on the market yet), but it has a much bigger screen and it looks like far more of an Android kind of phone.

GUGULETHU MFUPHI:  I must tell you something.  After feeling the original Kicka in my hand, it’s a lot bulkier than Vodacom’s one and this one actually seems like it’s a better option in the long run.

ARTHUR GOLDSTUCK:  If they can bring it to the market at the same price and the pricing hasn’t been confirmed yet, then it’s certainly going to give Vodacom a run for its money.

ALEC HOGG:  But surely, from the network provider’s perspective, the more people they can get into the market in Smartphones, the more data they’re going to sell so perhaps they’d subsidise it.

ARTHUR GOLDSTUCK:  There’s no question about it.  The MTN Steppa was heavily subsidised, as was this phone.  This is the Huawei Ascend Y220.  That came onto the market at the end of last year at R449.00, so the cheapest Smartphone on the market from a name brand.  It cleaned up the market as well, between that and the Steppa, and they sell hundreds of thousands between the two.  Both were subsidised and that’s why the Kicka from Vodacom is in fact, more realistically priced at R549.00.  That’s more sustainable.  The other low-cost Smartphones were not sustainable at the time.

ALEC HOGG:  Just from a broader perspective: clearly, these are Smartphones and you’ve said that, so it gives access to the Internet and it gives people who previously couldn’t afford an iPhone or a Galaxy that opportunity.  How’s it going to change the environment that you know so much about?

ARTHUR GOLDSTUCK:  One of the big changes that’s going to have to come to the market is a re-look at data costs from the networks.  Every one of those phones uses data in the background – the MTN Steppa, especially heavily and because of the MTN skin over the operating system, you have less control over how you use that data.  In effect, it’s sucking up data in the background without the user ever knowing it and the cost of that data is coming off their airtime. It’s ad hoc data at a top price in the market.  On MTN, it’s R1.00/mb and on Vodacom, it’s R2.00/mb.  When you’re unintentionally using data at that kind of cost, it’s going to result in a backlash.

ALEC HOGG:  That’s very high, Arthur.

ARTHUR GOLDSTUCK:  There’s no question.

ALEC HOGG:  R1.00/mb…we used to buy it at one cent/mb.  How can they charge so much?

ARTHUR GOLDSTUCK:  Well, if you buy a big enough bundle, you can get it at one cent/mb, but the entry-level market that we’re talking about here cannot afford bundles, so we’re campaigning heavily for the networks to bring down that ceiling price for data.

ALEC HOGG:  It’s like Woolies selling biltong at R1000.00/kg if you buy the little bits.

ARTHUR GOLDSTUCK:  It’s the same idea.  If you buy in bulk, you get it a lot cheaper.  However, who can afford to buy it in bulk at that segment of the market?

GUGULETHU MFUPHI:  Exactly.  Just on that, isn’t MTN maybe best positioned to take advantage of this, given the fact that it’s one of the biggest telco’s on the continent, versus Vodacom, which is more focused on S.A.?

ARTHUR GOLDSTUCK:  At this stage, it’s a market-by-market issue and Vodacom is a lot bigger in South Africa.  Vodacom being part of Vodafone globally as well is able to commission their own design of phones, whereas MTN relies on something called a reference design.  It’s a phone that’s been developed by chipmakers such as Qualcomm or Intel who put out the blueprints – or you could say the templates – for the phone.  Then someone like MTN or a retail outlet (and you will be seeing that soon as well) simply takes one of these reference designs, sends it to a factory in China, and has it built with their brand on top of it.

ALEC HOGG:  That would be Mr Price.

ARTHUR GOLDSTUCK:  Exactly.  It could well be Mr Price.   The Vodacom phones are in fact, commissioned by Vodafone and they put it out to tender so Alcatel, in fact, manufactures these cheap Vodacom phones.

ALEC HOGG:  You have such wonderful insights, but when one has a look from a broader perspective into the African continent, surely there’s such a huge demand for Smartphones that it’s going to be a bull factor for both Vodacom and MTN.  The market’s just so big.

ARTHUR GOLDSTUCK:  It’s a massive market.  At this stage, the winners are the manufacturers that get into those markets.  Samsung for example, is growing very rapidly in all the markets where Smartphone growth is at the highest.  Nokia still has a chance there, but Microsoft has announced they’re likely to pull out of the feature phone market, which is where Nokia still dominates the continent, so they have to come into that market with Windows phones, which at this stage are a lot more expensive.

GUGULETHU MFUPHI:  Is this just the tip of the iceberg?  Are tablets coming up next?

ARTHUR GOLDSTUCK:  This is the beginning, but it’s the beginning of a Smartphone revolution.  The tablet revolution is still a little way away.  They’re a little too expensive, too demanding, and the big issue in Africa is charging and battery life.  You have to produce devices that have long battery lives and don’t have to be charged every day.  At this stage, we don’t really have that luxury in the Smartphone or the tablet market.

ALEC HOGG:  Arthur, why should I trade in my iPhone for a Kicka, for example?

ARTHUR GOLDSTUCK:  You’re not going to because you are at the top end of the market, the same with people who use, for example, the Samsung Galaxy S4 or S5, the Sony Experia Z1 or Z2.  They are not in the market for these devices.  They are buying phones on contract where they’re paying between R300.00 and R500.00 per month on their contracts.  These are people who can only afford that once every couple of years, so for anyone currently using a feature phone that wants to upgrade to a Smartphone – these are the ideal devices.

ALEC HOGG:  Alec’s the guy who’s buying in bulk – that’s why.  Tell us about your juice bottle that’s on the table.  What’s that for?

ARTHUR GOLDSTUCK:  I brought this along because it’s symbolic of the great need that’s emerging in the Smartphone market.  Most of the high-end Smartphones (your iPhone, for example) does not last a full working day, so what you need is a portable charger and we’re going to see these proliferate across Africa.  This is a nice gimmicky one from a company called Momax, which is shaped like a juice bottle.  This will charge two high-end Smartphones off one charge of this device.  What we’re going to see more and more is smaller devices of this kind that will charge on of these low-end Smartphones.  For example, when you’re still on your way home and your phone is dying – that’s where you especially need the functionality of that Smartphone, so people are going to be carrying two devices.  One is a Smartphone and one is a charger.

GUGULETHU MFUPHI:  A juice bottle.


ALEC HOGG:  Thanks, man.

GUGULETHU MFUPHI:  Indeed, Arthur thank you so much for your time today.

ALEC HOGG:  Are you going to get one?  You said I’m not allowed to get one, so are you?

GUGULETHU MFUPHI:  I didn’t say that.

ARTHUR GOLDSTUCK:  You said I couldn’t trade in my iPhone because…

GUGULETHU MFUPHI:  Because you buy in bulk.

ALEC HOGG:  Buy in bulk…

GUGULETHU MFUPHI:  Alec, that’s what you said.

ALEC HOGG:  I’ve switched, by the way.  I’ve gone to MTN and my phone rings again.  It’s been amazing.  I actually get phone calls now.

GUGULETHU MFUPHI:  No slight there at Cell C.

ALEC HOGG:  I didn’t say Cell C.  You said it, Gugu.

GUGULETHU MFUPHI:  Oh, well…  People who watch this show on a regular basis know what we’re talking about.  Thanks to Arthur Goldstuck, MD of Worldwide Works.  Maybe we should have asked you ‘which is the best network’, but we’ll get you back for that one.  He’s also the Editor-in-Chief of Gadget.

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