Huawei and Microsoft – Out of Africa

There is a market in Africa for the taking, but a $199 smartphone is not the device that will do it.

• Huawei and Microsoft have announced a joint initiative to bring smartphones to Africa with the launch of a device and the nurturing of application development.
• This is also being launched at the same time as an initiative to offer cheap wireless internet access in Kenya but it seems to have nothing to do with the devices.
• The customised device is based on the Huawei W1 which I see retailing at $270 or so.
• I suspect that the 4Afrika initiative will have cut a number of corners in its device which is trying to be the cheapest Windows Phone in Africa.
• Unfortunately that is not saying much, and I can’t see this device retailing for much below $199.
• At that price, volumes are going to be very low unless a huge marketing effort is made to convince users why they should pay more than double than what they can get an Android device for.
• Even then, I still think that the price is likely to be way too high, meaning that the initiative’s success will depend on what devices follow the flagship.
• This is especially the case as 4Afrika is targeting tens of millions of devices over the next few years.
• If Microsoft were to drop its $16 (RFM estimate) per unit royalty it would help, but I fear that much more needs to be done to the hardware to bring the cost down.
• The initiative is also working on the application side and the device will launch with a range of Africa specific applications and content to further convince users of the value of the proposition.
• Whatever the rhetoric, this is already a crowded market.
• s40, Bada, Android as well as Sailfish OS and others are all targeting the lower end of the market and some of them have much larger volumes over which to amortise costs.
• I believe that the success or failure of this initiative will depend entirely on the price at which Microsoft and Huawei can put this device into the hands of users.
• In order to really work, I think this price needs to be below $100 which combined with the content might just tip the scales in 4Afrika’s favour.
• At the moment, I like s40 and Nokia’s Asha range for this market, as super cheap Android simply does not work very well and very soon everyone will realise that.
• Compared to cheap Android, Asha, gives users good hardware specification for the buck and uses a mature and well-functioning user experience.
• If all else fails, I think Nokia has a future in addressing the 500m feature phone market that everyone always seems to forget exists.