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Cheap is beautiful

2014-03-03 15:20 by Nathalie Kantorowicz (comments: 0)

While the Mobile World Congress has just ended in Barcelona, it seems that the announcements follow two opposite trends. The first one is along the ever more advanced tech and its line-up of sophisticated devices, with the new possibilities offered by 5G notably for video, and the wearables that capture the public's imagination, or devices that use advanced privacy security. And the other one is the advent of cheaper Smartphones.

Mozilla has created a mini-revolution with the launch of its $25 handset that runs on Firefox, backed by leading Asia-based OEMs like LG, Huawei and ZTE who had their own Firefox handsets on display. Nokia is launching a $120 device, the Nokia X, which runs on Android and offers all the possibilities of a Smartphone at a cheaper cost. A well-timed trend from the industry, when consumer spending for tech devices in the past 3 years has been very sluggish, according to GfK (-1% in 2012, +3% in 2013 and a forecast of -1% for 2014, for a total spend of 1,050bn$ worldwide across all tech devices). The tech market has been sustained since 2010 by the growth in Smartphones and tablet PCs, which started to bring solid growth rates of 10% to 13% in 2010 and 2011, before failing to counter the drop in more mature devices since 2012.

The other fact that makes the "cheap is beautiful" trend highly credible is the acquisition of WhatsApp by Facebook. Yet not the sky-rocketing price paid for the company, which put it right at the top-end of all acquisitions made in the tech space over the past years, but the fact WhatsApp has the ability to open Facebook to countries in Asia, Africa and South America.

Zuckerberg stated that the acquisition helps Facebook's project missions to provide Internet access to the two-thirds of the world not yet connected. Since most of that growth is expected in the developing markets where WhatsApp is popular, like India, where the app is even available on feature phones - phones that offer a few more features than calling and messaging, yet not as sophisticated as high-end Smartphones, and which require extremely small data fees.

At the end of 2013, out of the 2.7bn Internet users worldwide* 1.5bn are mobile users (Mobile Broadband and dongle users, vs. 700m Fixed Internet subscriptions*); by 2018 the number of Fixed Internet subscriptions is expected to remain at similar levels while mobile Internet subscriptions should be around 6.5bn*, so the emergence of cheap Internet-enabled mobile devices seems indeed the likeliest way to get these remaining 2/3 of the world to connect.

*The state of Broadband 2013, Broadband Commission from International Telecommunication Union and the United Nations

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