N.Z. Consumers Want Cheaper Smartphones, Telecom’s Reynolds Says

New Zealand consumers are unwilling to pay current prices for smartphones, limiting sales even amid increased demand for applications offered by Facebook Inc., Telecom Corp. (TEL)’s chief executive officer said.

About 25 percent of Telecom’s mobile device sales are smartphones, Paul Reynolds said today on a conference call after New Zealand’s biggest phone company announced its first-quarter earnings. The share of overall sales lags behind other nations such as the U.S. where penetration is about 70 percent, he said.

“We do find in the New Zealand market getting to those sorts of penetrations requires the delivery of smartphones at much lower price points,” he said. “In mobile and other consumer segments in New Zealand things tend to be very price-driven rather than just feature-driven.”

New Zealand’s economy expanded just 0.2 percent in the second quarter and house prices are falling, prompting consumers to curb spending as the recovery from the nation’s worst decade in three falters. Consumer confidence fell to a 14-month low last month, according to the ANZ-Roy Morgan index.

Sales of smartphones made by Apple Inc. (AAPL), Nokia Oyj and others rose 95 percent in the third quarter from the same period last year to 80.9 million units, analyst firm Canalys said in a report on Nov. 1.

Telecom offers devices based on Goggle Inc.’s Android software and will increase its offer of products with Microsoft Corp.’s Windows Phone 7 system, it said today. The company expects sales, and average revenue per mobile customer, to improve as demand for data access and applications grows while the prices of devices fall, Reynolds said.

Facebook Driving Revenue

The revenue-per-user increases “are substantially driven by kids doing Facebook on their new smartphones,” he said. “There’s a myriad of stuff that comes out as new applications when you move across. People are going to be using more and more data.”

Reynolds expects smartphone prices will fall, sparking greater sales.

“We are starting to see that with Nokia Symbian and others delivering much lower-cost smartphone devices,” he said. “The low-cost devices are coming through, so the number is only going to rise.”

Telecom today said net income fell 37 percent to NZ$103 million ($82 million) in the first quarter from a year earlier. Average revenue per mobile customer rose 2 percent, it said in a statement.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Iain Wilson iwilson2@bloomberg.net

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