CDMA2000 to dominate entry-level market for 3G services
September 20, 2006
The CDMA Development Group (CDG) commented on the findings within a new Yankee Group study on entry-level handset pricing in India for the second quarter of 2006. Specifically, the study found the Average Selling Price (ASP) difference between entry-level GSM and CDMA2000 handsets imported to India to be approximately US$5. Across the entire product portfolio, CDMA2000's average selling price remained lower than GSM by an average of US$35. These results are consistent with those reported by the Yankee Group for the first quarter of 2006.
"The experiences of CDMA2000 in India show that 3G offers greater value than 2G to operators and their users in emerging markets," said Perry LaForge, executive director of the CDG. "With the entry-level GSM and CDMA2000 handsets reaching cost parity, users even in the most price-sensitive market segments are increasingly choosing CDMA2000 because it delivers more value with differentiated 3G services."
Completed in August 2006, Yankee Group's study of mobile handset sales in India found that up to 64% of all CDMA2000 handsets sell for less than US$50. The CDMA2000 industry in India continues to offer 22 handsets from 10 suppliers, while the GSM industry offers 17 handsets from 5 suppliers.
The availability of low-cost CDMA2000 handsets is not limited to India. "We see virtually no difference in the cost of entry-level and high-end handsets between GSM and CDMA2000," said Xiaoyu Tong, general manager of China Unicom's value added service department. "Our strategic direction is to strengthen our competitive posture through the delivery of revenue generating, next generation services using CDMA2000 devices and not solely to rely upon voice and short message service revenue from GSM devices."
Yankee Group also found that rock-bottom pricing is not the singular determinant in handset sales. Rather, consumers choose a service provider based on factors such as device features and functionality including color screens, games, Internet access, personalization, advanced messaging functions, and camera capability; brand awareness; quality perception; value of communications relative to other consumables; distribution and general product availability; and other intangibles. As evidence to this, a single CDMA2000 entry-level handset, the ZTE C-150, has surpassed the combined sales of all GSM Emerging Marketing Handsets (EMH) in India by a factor of three, since these handsets were first introduced in January 2006.
The Yankee study further suggests that subscribers targeted with sub-$50 handsets will demand sophisticated and aggressive segmentation similar to the rest of the market, including access to value-added data services. In Brazil, for example, consumers have shown little desire to purchase EMH handsets since they don't offer the same level of product guarantee, packaging and delivery that they are accustomed to receiving.
According to John Jackson, director of wireless/mobile technologies at the Yankee Group, "Low-income consumers don't necessarily want the cheapest phone, and the lowest-priced handset may actually drive consumers away. They don't want to be treated as second-class citizens."
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