Motorola takes aim at Nokia with low-end handset

The world's number two handset maker was awarded a tender by industry trade group the GSM Association on Monday to supply budget mobile phones to a group of nine operators, including India's Bharti Televentures, Thailand's AIS Telecom as well as Globe and Smart Communications of the Philippines.

Under the contract, Motorola will offer its new C11x series at less than US$40 each. Previously, the lowest selling price for a Motorola phone was around US$50.

Despite reporting record shipments in the fourth quarter of 2004, there is still a wide gap between Motorola and market leader Nokia in emerging markets such as Indonesia, Thailand and the Philippines.

This is about to change, said Scott Durchslag, general manager of Motorola's Personal Communications Sector for Southeast Asia.

"This tender hits at the sweet spot of the growth markets," Durchslag told CNETAsia on the sidelines of the 3GSM World Congress tradeshow here.

"These markets are still unnaturally dominated by Nokia. The move attacks Nokia… by opening a segment beneath them," he added.

As part of the deal, Motorola will supply 6 million phones to the operators, a volume which represents almost 1 percent of global handset shipments in 2004. The company also plans to produce a sub-US$30 handset by 2006.

According to Durchslag, while the new handsets are priced low, they will still be able to deliver "industry-average" profits through the large initial order. He added Motorola has also received enquiries from other operators around the world, and the costs will go even lower as orders increase.

The tender process is part of the GSM Association's new "Connecting the unconnected" program, which seeks to deliver communication services to low-income, emerging markets.

However, dropping handset prices is just one part of the equation in driving mobile penetration in these countries, argued Durchslag.

Motorola was "killing ourselves to cut 20 cents out of the phone", he said, and other industry players had equally large roles to play before more people will be able to afford wireless services.

For example, he said governments should reduce or remove taxes on low-end phones, and operators should also introduce "ultra-low" tariffs.

Phone fiesta
Motorola's announcement was one of many on the first day of the 3GSM World Congress. The company also unveiled several other models for the year, including the slim SLVR and the rounded PEBL handset, both expected to be commercially available in the third quarter of this year.

It also announced a partnership with Internet telephony provider Skype to include the latter's client software on selected Motorola products.

In other announcements, Finnish phone giant Nokia launched four new models, including the dual-camera third-generation phone 6680. The firm also took the wraps off an operator co-branding strategy and a partnership to use the Windows Media Player platform on its handsets. It also announced the licensing of Microsoft's Exchange Server ActiveSync protocol.

London-based Sony Ericsson, on the other hand, unveiled two third-generation phones and said it will launch music-centric Walkman phones next month.

CNETAsia's Aloysius Choong reported from Cannes, France.