Motorola chosen to make sub-$40 handsets for emerging markets

CANNES, France -- The GSM Association has kick-started an effort to develop 'Ultra-Low Cost' mobile handsets targeted at emerging countries that would sell initially at a sub $40 cost price. Motorola launched the first such phone at the 3GSM World Congress, which the GSMA says is the first step towards a sub $30 handset target.

The initiative comes on the back of research commissioned by the Association that identified handset cost as the single biggest barrier to mobile communications affordability in emerging markets.

"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 to create critical mass through a special procurement initiative. Operators backing the initiative at the first stage included 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 working group then came up with a specification after which tenders were issued and this resulted in further dialogue with 18 different handset vendors, and Motorola was selected to produce the first handset.

Rob Conway, Chief Executive Officer of the GSMA, commented: "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, which is about 1 percent of the global handset market. Conway said as economies of scale kick-in, the new market segment has the potential to add more than a 100 million new connections per year.

"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."

Motorola will be offering a family of products built on its C114 platform that is optimized for the durability, long talk time, and design preferences of emerging markets. Motorola has committed to start delivering the handsets during the second quarter of 2005 at a price point below $40 (ex factory) and said it intends to work with GSMA members to develop follow-on products at sub $30 price points.

In its next phase, the project will be extended to other emerging market operators, while more vendors will be encouraged to supply terminals.

According to GSMA estimates, some 80 percent of the world's population has wireless coverage but only 25 percent use mobile services.