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by Arthur Goldstuck (@art2gee) The numbers from South Africa’s largest mobile phone retailer show, along with other fascinating insights, a massive shift happening in the smartphone market right now.

The shift from feature phones to smartphones in South Africa is happening faster than anyone could have imagined just a few months ago.

Huawei Ascend Y220Sales figures from the country’s largest mobile phone retailer, Pep Stores, reveal a radical transformation in the phone-buying habits of the low- and middle-income segments of South Africa’s population.

Pep’s own numbers, however, are equally startling. In the year to the end of June 2014, it sold no less than 6,7-million pre-paid phones – half of all phones sold on pre-paid deals in South Africa during that period, according to John Edwards, Executive: Cellular at Pep Stores.

The biggest surprise in its numbers, however, lurk in the smartphone sales figures.

In the half-year to December 2013, 1% of prepaid phones sold were smartphones. For the full year, by the end of June 2014, that number had shot up to 7%, implying a rise to 13% in the first six months of 2014.

But that’s not where it ends. In one month alone – March 2014 – the smartphone contribution was at 23%, thanks to special offers and new low-cost handsets.

“We’re forecasting that number to rise to 30% in the last quarter of the year,” says Edwards. “It’s driven by handset subsidies from the networks, but I suspect that if you took away the subsidies, the volumes wouldn’t be significantly lower.”

Edwards believes that smartphone demand has also been driven by the massive uptake of WhatsApp, the instant messaging app that is now accessible on many feature phones as well as all entry-level smartphones.

The obvious devices, sub-R500 Android phones like the MTN Steppa and Huawei Ascend Y220, made a big contribution. However, Pep also made a massive impact by introducing a WhatsApp-specific feature phone: the AG Whutz-Zappa, at a cost of R399.

Thanks to a funky name and a WhatsApp shortcut button, it’s captured the imagination of the low-income segment that aspires to instant messaging services. Camera, MP3 player and WAP browser means it’s got the basics, but it’s also, no doubt, a stepping stone towards owning a basic smartphone – which will come down to the same price in the next year or so.

That’s good and bad news for the mobile operators, who are struggling with strategies to cope with declining voice revenues.

“On the Android phones we sold, the average revenue per user (ARPU) is three times as much as on feature phones,” says Edwards. “There’s clearly a swing at the low end, from consumers who are desperate for access to Android devices and definitely to instant messaging.

“But that is only part of it. My gut feel is, if you put the tool in people’s hands, they will use it. Before I saw the ARPUs, I assumed it was all about WhatsApp. Clearly, the data wave is coming.”

That also means, however, that the operators will have to rethink their data pricing strategy. The network that is cheapest for voice calls, Cell C, is the most expensive for ad hoc use of data, at R2 per Megabyte.

“A Pep customer buys, on average, a R15 voucher,” says Edwards. “These guys live hand to mouth. You can’t give them bill-shock. If they lose R15 for an app running in background, they’re going to dump the phone.”

Arthur Goldstuck

Arthur Goldstuck heads up World Wide Worx (www.worldwideworx.com) and is editor-in-chief of Gadget. He is a consulting editor to MarkLives and our media tech columnist. Follow him on Twitter on @art2gee. This article has been republished from Gadget.

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Published by Herman Manson

MarkLives.com is edited by Herman Manson. Follow us on Twitter - http://twitter.com/marklives

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