GSM Association Defines New 'Ultra-Low Cost' Handset Segment to

Press Release:

GSM Association Defines New 'Ultra-Low Cost' Handset Segment to Connect the Unconnected

Press Release
News Article February 2005

CANNES, France - 3GSM World Congress, February 14/PRNewswire/ -- In response to demand from emerging markets, the GSM Association (GSMA) is forging the way toward a new 'Ultra-Low Cost' mobile handset market segment aimed initially at a sub US$40 cost price. The launch today of the first sub US$40 handset achieves this goal and is the first step towards a sub US$30 handset target.

This initiative was kick-started by GSMA commissioned research that identified handset cost as the single biggest barrier to mobile communications affordability in emerging markets. The association wanted to use the economies of scale of GSM to drive a new 'Ultra-Low Cost' market segment yet with an attractive and high quality handset.

"One of our key goals as a global trade association is to help connect the 'unconnected' people of the World, a mission that is critical to the social and economic development of many emerging market countries," said Craig Ehrlich, Chairman of the GSM Association. "By directly addressing the cost of handset ownership, we believe that we can unlock the new 'Ultra-Low Cost' market segment."

The GSMA brought together a group of its operator members that serve emerging markets(1) to create critical mass through a special procurement initiative. The operators participating in this stage of the initiative are: AIS Telecom, Bharti Televentures, Globe Telecom, Maxis Mobile, Orascom, SingTel Mobile, Smart Communications, Telenor Mobile and Turkcell. They represent significant presence in Eurasia, the Arab World and Latin America.

A handset specification and tender was then issued and this resulted in further dialogue with 18 different handset vendors, further to which Motorola was selected.

"We are pleased to announce that Motorola has been chosen to supply the first GSMA-endorsed handsets for the 'Ultra-Low Cost' segment," said Rob Conway, Chief Executive Officer of the GSMA. "They had a vision and strategy for this market segment which fits very well with what we wanted to achieve."

The initial unit volume target for the first six months, once shipments begin, is 6 million handsets. This equates to approximately 1 per cent of the global handset market. As economies of scale kick-in, this new market segment has the potential to add more than a 100 million new connections per year.

Motorola will be offering a family of products built on its new, ultra-low cost C114 platform that is optimised for the durability, long talk time, and design preferences of emerging markets. Motorola has committed to start delivering these products during the second quarter at a price point below US$40 (ex factory) and has a strategic intent to work with GSMA members to develop follow-on products at sub US$30 price points.

Commenting, Ed Zander Chief Executive Officer, Motorola said, "Connecting the unconnected with new Ultra-Low Cost, high quality, beautifully-designed handsets is a critical component of Motorola's growth strategy - and it is the right thing for us to do as a good global citizen. We are delighted to have won the opportunity to seamlessly partner with the GSMA and member operators to deliver the magic of mobile communications to those who have never experienced it."

The next stage of the project will see the project extended to other emerging market operators, while more vendors will be encouraged to supply terminals for this sizable segment.

According to GSMA estimates, in the region of 80 per cent of the world's population have wireless coverage but only 25 per cent use mobile services. By bridging the gap between supply and demand, the GSMA has been able to provide a catalyst that will kick-start mobile penetration into a user segment previously considered to be outside the addressable market.

"This announcement is just the beginning," added Conway. "We also believe that the creation of the 'Ultra-Low Cost' market segment represents a significant step towards a sustainable business case for all players in the supply chain. Our mission is to aid economic and social development, by ensuring more people than ever before benefit from mobile communications."

Importantly, the mobile usage equation has three major elements: handset, service provision and regulatory / tax requirements. While the GSMA is working with operators and vendors to address the first two, the third requires serious government support to lower taxes and regulatory requirements. The GSMA will be reaching out to governments and regulators across emerging markets towards this goal.

(1)Emerging market operators are defined as those based in any country that is below the average in the World Bank's GNI (GNP per capita index) and has mobile penetration below 50%.

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