9/1/2010 11:06:00 AM
Android prepay: a new market
Anyone with half an eye on the ball will have noticed the success of Android over the last year. The platform is doing exceptionally well in the contract space, grabbing market share as well as consumers’ attention.
Although Android handsets on prepay had been difficult to come by, a new wave of Android phones are being launched on pay-as-you-go and are starting to trickle out to consumers. This is set to grow further.
Google will inevitably do well by taking hold of more share through the launch of lower end Android handsets, but what are the benefits for operators, manufacturers and retailers?
There are several prepay handsets in the market already, notably from emerging manufacturers such as ZTE and Huawei.
The ZTE Racer, the Chinese manufacturer’s first Android handset, was launched on 3 in July. The entry level touch-screen device is available for £99.99 on pay-as-you-go – the first Android handset to be launched around £100.
3 is planning more launches in the near future, further demonstrating the appetite for Google’s operating system at a lower price point.
3 head of internet services David Kerrigan explains: ‘Alongside the ZTE Racer, sales of which have been impressive and continue to grow, we will be launching another sub-£100 Android phone next month, and a sub-£150 Android phone shortly after that.’
The £100 price point has long been considered a benchmark by retailers and manufacturers. As one manufacturer source explains: ‘It is a special price point. It is a psychological thing because it is a reasonable amount for a decent phone.’
And as retailers gear up for Christmas, they will have already secured their handset lines. A selection of Android phones on prepay are expected to feature across a range of price points.
Carphone Warehouse has already started selling the LG Optimus GT540 at £99.95. The handset has been available since May, but is still likely to be a hot Christmas gift.
Meanwhile, retailers are reporting that consumers are actually going into stores and asking for Android on pay-as-you-go, rather than for the handset model itself.
T-Mobile retailers are claiming a similar experience when selling the T-Mobile Pulse Mini. The operator’s own brand handset was the first Android prepay handset and appears to have created a niche for itself.
One staffer says: ‘The Pulse Mini does well for itself considering that there isn’t that much awareness of it. People come in and ask for a prepay Android handset and we direct them towards the Pulse Mini.’
However, he adds: ‘But there is a bit of difficulty around it because they get six months’ free internet and then after that, it can be quite expensive.’
Orange is also looking at the emerging segment closely. In May, the operator announced plans to launch a range of mid-tier Android smartphones priced at around £100 across the group. Orange’s first own brand Android handset is expected to hit the UK in September.
The price of Android handsets is starting to fall, which has allowed Orange to offer the operating system in a different price segment, an Orange spokesman explains.
Orange also believes that consumers are willing to pay more for a pay-as-you-go handset that has the latest features. ‘In our experience, consumers will pay slightly more to have the latest technology. Although the price of Android operating system devices is starting to come down, so it’s a win-win for the consumer,’ he adds.
So the benefits for the consumer are easy to see – lower prices for technology that is constantly developing, and with lower prices comes a good dose of flexibility.
However, for retailers and manufacturers, low price Android could be a real game changer.
One source suggests that the benefits for retailers will come in the long term as they become less dependent on one manufacturer – namely Apple. ‘The retailers are really keen to carve out a new segment that offers customers a choice of handsets.
In turn, that means they can build relationships with a range of manufacturers and not have to worry about maintaining a relationship with one manufacturer,’ he says.
It seems Android is managing to successfully create an alternative for both consumers and retailers. The development of a new segment in pay-as-you-go is likely to give the operating system an edge on its rivals.
Retailers are more likely to provide dedicated retail space for the operating system, giving it more prominence in the shopping environment.
But some are sceptical about the benefit for manufacturers, while others think that the move into lower end Android handsets makes sense.
Strategy Analytics director of wireless practice Neil Mawston says: ‘During the Christmas season, there is always a jump in prepay sales.
Traditionally, Nokia has benefitted from sales in the candybar segment.
‘For some manufacturers, a move to launch prepay Android handsets may be as much of a marketing exercise as one for generating revenue. Some companies will focus on profit while others, like Samsung, have a goal to overtake Nokia in the UK.’
Mawston’s view fits in with ZTE, which is aiming to have a 10% share of the UK handset market by 2012. The manufacturer has already launched one Android handset and is planning another before the end of the year. Android prepay handsets could be a big part of ZTE’s success in cracking market share, a key objective for the manufacturer.
Meanwhile, others are reserving judgment on the benefits of Android prepay handsets for manufacturers.
One source says: ‘Any manufacturer entering the market with an Android handset that costs less than £100 will be struggling to make money. However, it is very unlikely that the cost of Android handsets will drop below £100, because Android cannot be that cheap.’
But despite reservations from some corners in the industry about Android’s value on prepay, it is rapidly emerging as an option for consumers. No doubt Christmas will be a good way to test the water for the platform and could decide whether Android prepay becomes a permanent feature for retailers and operators.