Android pricing key driver of market share in $15b smartphone sector

In the tablet sector, Microsoft Surface may be compelling for business

Carriers continue to absorb the lion’s share of the fast growing $15 billion smartphone sector in Australia, according to a new study. In competitive terms it is the pricing strategies of Android vendors that will have the most impact on market share, while the mooted Facebook phone is just one potential disrupter in the medium term.

And there’s little prospect of any slowdown in growth or competition, says Telsyte in its 2012 smartphone study.

Meanwhile, questioned separately about the tablet market, Telsyte director of research Foad Fadaghi said Microsoft’s Surface might provide a compelling solution for companies embarking on their Windows 8 transition. The total mobile services market in Australia which includes tablets is expected to reach 35 million subscriptions by June 2014, according to earlier research published by Telsyte, and reported by Computerworld.

In its most recent study, Telsyte noted that the bulk of the sector’s revenues are being captured by carriers, with app developers, mobile advertising and accessories providers’ contribution less than 7 per cent of the total.

However, with other research indicating explosive potential growth in mobile advertising, in particular that imbalance may be redressed over the next few years.

Android and iPhones dominate market share currently and nothing in the outlook to 2016 suggests that will change. However Fadaghi said, “The arrival of a new product or platform, or a product that completely replaces smartphones might come into the picture beyond 2016.”

He added in the short term the pricing strategies of Android vendors are key to market share variations. “The carrier push is also very important. Carriers like Android as its closer to the business model they are used to from yesteryear. They also make more margins off Android devices and a fragmented market keeps their dominance.”

For BlackBerry and Nokia, the two notable strugglers in the smartphone game, the outlook remains poor. With the consumerisation of smartphones and choice in the workforce through trends like BYOD, BlackBerry lacks a consumer base locally from which to expand. And Nokia, which once dominated the regular phone market, lags in the smartphone space.

One intriguing possibility of course is Facebook’s much speculated entry into the market with its own device. Telsyte devotes some space in its report to the discussion. It suggests that the rapid migration of its current users to mobile and the fact that “its next billion users will mostly come from developing nations without significant PC/Fixed line penetration” provides impetus for such a strategy.

And with a very robust and growing development community, Facebook can deploy that natural advantage in any push.

But the analysts also caution that such a move is not without risk to Facebook which as an app is already ubiquitous across current platforms. Plus, the company lacks the kinds of distribution and hardware relationship its needs to ensure success in a market it would be coming to very late.

Of course, not all the action for consumer attention is captured by the smartphones. The tablet market will also expand rapidly as competitors emerge to the iPad.

Microsoft’s Surface is the latest offering, and given the company’s decision to do its own manufacturing, provides capacity for disruption. Fadaghi said, “The Microsoft tablet has comes late to the party but might provide a compelling proposition for businesses that have a Windows 8 roadmap.”

In particular, he noted the suitability of the device for content creation and as a transition from desktop to tablet for productivity applications like Excel and Word.

Indeed, during the launch Microsoft repeatedly emphasised that its tablet is a PC, and other commentators have highlighted the strength of the Microsoft ISV community and the ubiquity as Windows as key strengths of Surface.

Fadaghi cautioned though on the implications for Microsoft’s other relationships — with its OEMs. “It’s a delicate balancing act for Microsoft. Microsoft in house design and branding sees the company trying to keep up with Apple, but in turn it might upset its OEM partners and create issues for its current business model.”

He also suggested that there are also some risks that its partners might create better versions of Windows tablets, affecting its own offering. “And there is a risk around margins as tablets devices have lower margins than its software business.”

For more details on the smartphone study visit: http://www.telsyte.com.au/?p=1397

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More about: Apple, BlackBerry, Excel, Facebook, Microsoft, Nokia, Telsyte
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