The Need For Smartphone Subsidy
Mobile Web West Africa has come and gone. During one of the presentations, it was revealed that Blackberry was the leading smartphone platform in Nigeria. Considering the immense popularity of Blackberry smartpphones, that piece of information did not raise eyebrows. However, when the speaker said the leading platform in Nigeria numbered just 2.4 million, the silence was broken. Reactions varied from utter disbelieve to bewilderment. 2 million is a ridiculously low amount for the leading platform when you consider that over 90 million lines have been registered nationwide. Simple arithmetics tells us Blackberry smartphone make up just 3% of the mobile market.
The entire smartphone market is just below 10%. In constrast, countries in Europe and North America report over 50% adoption rate. This leads to an inevitable conclusion. Nigeria is a negligible smartphone market. I know that statement bruises our ego and national pride but it is the truth. This is buttressed further when you realise most people buy used phones nowadays. Despite the popularity of Blackberries, Android and Iphone platforms, smartphone adoption remains low. Lack of awareness is a huge factor in this. However, the main factor is the price of smartphones. Nowadays, the most desirable smartphones out there are usually over #50,000. A few are above the #100,000 mark. In a country where over 50% of the population live on $2 or less daily, smartphones of that price range are out of reach.
The question is, what is the way out? Phone Subsidy. It is a known fact that even in rich countries, network providers subsidize phones. A majority of smartphones are sold at the subsidized rate. How Subsidy Works When a manufacturer releases a new phone, it enters into negotiation with network providers to subsidize their products. The network providers will then sell smartphones at a far cheaper rate. Sometimes, these phones are given out free. To own one of these subsidized smartphones, a customer enters into a contract with the network provider. Generally, the contract stipulates a certain monthly fee the user must pay for a period ranging from 18-24 months.
This monthly fee is the charge for subscription to monthly services which include call minutes, text messages and data services. In essence, a user keeps his end of the bargain by subscribing monthly to an agreed plan. The smartphone is usually branded and sim-locked by the network. For example, Vodafone in the UK offers three different Samsung Galaxy S3 contracts. For an initial cost of £89 (#22,250), a customer can get a new Samsung Galaxy S3. The contract includes a monthly plan which the user must for worth £31(#7,500) a month which includes 300 minutes of calls, unlimited number of text messages and 500MB of data. A similar plan cost £0 initially for the phone and £41 (#10,250) monthly fee which gets you 900 minutes of calls, unlimited text messages and 2GB of data. This essentially gets you the best phone in the world for free. * A Samsung Galaxy S3 without contract will set you back £500 (#125,000).
Having established how economic hardship is making it difficult for most Nigerians to own smartphones, contract phones seem like the best way out. Consider the following scenario: Imagine getting a Samsung Galaxy Note for #30,000 on contract (normal price of phone is #90,000) and all you have to do is subscribe to a #5,000 monthly plan which gets you 300 minutes of calls, 500 text messages and 1GB of data. Wouldn't you eagerly buy the phone on contract?