THE war of the smartphones has definitely begun!
History has proven that dominance cannot be enjoyed by one party for too long. So indeed, while Maxis had enjoyed monopolistic dominance on iPhone over the last one year, this will soon come to an end with DiGi.Com Bhd also tying up with Apple Inc for the rights to distribute the world’s most exciting phone.
DiGi expects to start selling iPhone 3G and 3GS in the “coming months”, chief executive officer Johan Dennelind said in a Bloomberg News report. Reports have also indicated that Celcom Axiata Bhd may consider doing the same.
A HTC smartphone (left) and an Apple iPhone seen at a mobile phone shop.The iPhone phenomenon has revolutionised the global mobile phone industry.
The iPhone will be sold by DiGi before mid-year which may spark a price war on services and packages in the smartphone market.
On its website, DiGi said that those already with an iPhone could switch to any of DiGi’s existing postpaid and prepaid rate plans.
Celcom chief executive officer Datuk Seri Shazalli Ramly said the company’s infrastructure can support the device but a big hurdle to securing the iPhone deal is the commercial terms that both parties cannot agree on.
In Malaysia, market research company IDC claims that Maxis last year sold 91,000 units since the launch in March 2009 and the shipments included both the iPhone 3G and iPhone 3GS.
The iPhone phenomenon has revolutionised the global mobile phone industry, with operators in matured markets such as Britain and the United States benefiting from increased usage of data services. Based on the packages signed up by Maxis iPhone users, average revenue per users is significantly higher.
“I spend a lot more money on my monthly phone bills and use a lot more of the services connected to the device. I now use close to 25Mb per month from almost zero previously,” says an analyst who is an iPhone user.
Huge brand penetration
For DiGi, the iPhone deal could help boost its non-voice revenue, which now makes up less than 20% of group revenue. This segment contributes over 30% to Celcom and Maxis.
For the last two years, mobile operators have increased their focus to sell more wireless broadband services, including unlimited data packages for smart phones and lap tops.
In Maxis’ and DiGi’s bid to outwit each other in the war of the iPhones, analysts don’t expect to see major price reductions.
“I don’t expect there to be a major price war happening anytime soon. Telco operators rarely benefit from waging a price war that would entail further value destruction. In the case of the iPhone, the differentiating factor could be the ‘perceived value’ of the plans that will be offered which could potentially be bundled with voice and data” says OSK telecommunications analyst Jeffrey Tan.
He feels that DiGi will reposition its plans and leverage on its value propositions to offer more attractive packages, to cater to the youth market for instance.
“There is pentup demand for iPhones, especially in countries where there is a large addressable youth segment which are technology receptive and technically savvy. In Malaysia, the steep price points of the handset and plans are key deterrents. Hence, I don’t see DiGi’s entry into the iPhone market colliding with Maxis head-on,” says Tan.
In fact, he feels that DiGi may open a whole new market segment for the iPhones.
A telco analyst from a local house feels that end consumers will be the main beneficiaries.
“Operators still need to incur huge capital expenditures for their respective networks, so I doubt anyone of them will embark on fierce price ways,” says a telco analyst from a local house.
An analyst from a bank-backed research says that the iPhone will help DiGi compete with other players. However, its efforts may be hampered if it does not improve its 3G coverage.
“DiGi still needs to address its issues of providing a better and faster network as well as better customer service,” he says.
“For instance, an iPhone user who stays in Kota Damansara will continue using Maxis services because in that area, DiGi does not have 3G coverage,” he says.
He adds that while there will initially be some competition, eventually data plans in terms of pricing and packages will almost be similar.
“I don’t believe the iPhone will change the market share position of the players too much. As it is, cracked iPhones in the last one year have already been operating on DiGi’s and Celcom’s network,” he says.
Nonetheless, this analyst believes that the iPhone will be able to improve DiGi’s as well as Maxis’ average revenue per user.
The Android
The iPhone, too, won’t enjoy single dominance for long. Another Smartphone is coming to town. Google’s Android phone is set to make its debut in the second half of this year.
While many feel that Apple’s iPhone first-mover advantage will still render it the most popular phone in Malaysia, it’s possible for the Android to steal a sizeable amount of market share from the iPhone.
For one thing, Apple has a closed system, which is exclusive only to the iPhone. The Android, however, operates on an open-source operating system which means it can be used by a wider array of phones.
Companies that make phones that run on this system include Taiwan-based HTC, which also makes phones for AT&T (T), Sprint (S), T-Mobile, Verizon (VZ) and US Cellular.
“Apple does have a headstart. It now has close to 140,000 applications and is growing everyday. Over the longer run, however, Apple’s closed system may make them more as a niche player while the open Android system may become more mainstream. But the Android will eventually catch up,” says one telco analyst.
Another analyst agrees.
“Its biggest weakness (which is also its biggest strength) is that there is only one iPhone. It’s a cool branding and has hype surrounding it. The Android will very likely run on hundreds of devices, in every market in the world, and is the only platform other than the iPhone that has a proper applications market. So, yes, it will give the iPhone a run for its money,” he says.
He admits though, that Google will need time and investments to roll out its applications.
He also points out that Apple’s strategy has never been to appeal to the mass market. Right from the start, it was targeting the high price markets with higher margins. It was never the plan to go after the lower mass priced market.
“Unlike the iPhone, the Android will most likely have the highest chance of ‘casual buyers’ – people who just browse into a store with no idea of what phone to buy,” says the analyst.
Right now, the iPhone is sold in 85 countries and has about 140,000 applications that can be downloaded.
A recent report released by Gartner said Apple iPhone’s sales had doubled in 2009, with 24.9 million units sold in 2009 against 11.4 million units in 2008.
Source: Tay Lin Say linsay@thestar.com.my
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