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Microsoft Takes On BlackBerry, Android in South Africa

Microsoft Corp. (MSFT), trying to find growth markets for its mobile products, is projecting that rising demand in South Africa will help it pass BlackBerry and Android and pave the way for further gains on the continent.

The company, working with hardware partners such as Nokia Oyj (NOK1V) and HTC Corp. (2498), plans to become South Africa’s No. 1 smartphone provider by 2016, Gustavo Fuchs, who runs its Windows Phone business in Africa and Middle East, said in an interview. The company plans models across a range of prices to lure users in the continent’s biggest economy, where the average household income is about $13,500 a year.

Africa will be the fastest-growing market by wireless subscribers over the next five years, according to consulting firm A.T. Kearney. Redmond, Washington-based Microsoft is seeking areas of growth for its mobile business, which lags far behind Apple Inc. (AAPL) and Google Inc.’s Android that combined account for about 90 percent of the global smartphone market.

“With a low-smartphone-penetration market, Windows Phone has a bigger chance to be the first smartphone for users,” Fuchs said in a phone interview from Johannesburg. “The smartphone snowball effect has started.”

Photographer: Simon Dawson/Bloomberg

Microsoft Corp.’s share has grown rapidly recently, and the company now has 10 percent of the market, helped by the introduction of the new Windows Phone 8 software in November. Close

Microsoft Corp.’s share has grown rapidly recently, and the company now has 10 percent... Read More

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Photographer: Simon Dawson/Bloomberg

Microsoft Corp.’s share has grown rapidly recently, and the company now has 10 percent of the market, helped by the introduction of the new Windows Phone 8 software in November.

Africa’s handset ownership will grow to 85 percent of the population in 2015 from about 73 percent last year, reaching 900 million users, A.T. Kearney estimates. In contrast, in several developed markets in Europe, North America and Asia growth has slowed as penetration has surpassed 100 percent.

Soaring Demand

More than 59 million phones were shipped to Africa and the Middle East in the three months through December, up 16 percent from the previous quarter, according to market researcher IDC.

Johannesburg-based MTN Group Ltd. (MTN), Africa’s largest wireless provider, more than doubled the number of active smartphone users to 4.4 million in the 18 months through June 2012, according to consulting firm Deloitte. Rival Vodacom Group Ltd. (VOD)’s smartphone users almost doubled to 5.8 million from 3.1 million in the two years through December 2012, according to its financial reports.

South Africa’s smartphone usage has been driven by large screens, touch interfaces and the high cost of other ways of accessing the Internet, according to Deloitte.

BlackBerry, benefiting from its free messaging function, had 51 percent of the South African smartphone market in 2012, down from 55 percent a year earlier, according to research firm Canalys. Manufacturers using Google Inc. (GOOG)’s Android software more than doubled their market share to 34 percent, while Microsoft boosted its share to 2 percent from nothing in 2011.

BlackBerry’s Challenges

Still, Microsoft’s share has grown rapidly recently, and the company now has 10 percent of the market, helped by the introduction of the new Windows Phone 8 software in November, Fuchs said.

Microsoft is benefiting from challenges that Canada’s BlackBerry has had with refreshing its product line, Fuchs said. BlackBerry’s dominance has also been eroded by smartphone applications such as WhatsApp that emulate its messaging function, he said.

BlackBerry will continue to introduce smartphones with Internet access in South Africa at affordable prices, according to El Loubser, a spokeswoman for the company.

BlackBerry (BBRY) Messenger has been a huge success in South Africa,” she said in an e-mail. The proportion of mobile-phone users living in towns and cities that use the BlackBerry messaging function has jumped to 17 percent from 3 percent 18 months ago, she said.

Kenya, Nigeria

Mircosoft slipped 0.2 percent to $33.43 at 11:23 a.m. in New York. The stock has gained about 25 percent this year.

Microsoft also targets expanding sales in other large African countries such as Kenya and Nigeria, Fuchs said. Nigeria’s smartphone penetration has doubled every year and is now 10 percent, he said. Nokia’s Lumia phones running Windows went on sale in Kenya in February and sold out, he said, declining to disclose how many devices were available.

“Kenya is important as a hub, not a single market,” he said. “We might have some challenges in terms of GDP, price point of devices, but it could be the cultural driver of East Africa. Everything that happens in Kenya gets expanded into Tanzania or Uganda.”

Nigeria, Africa’s most populous country, had 113 million wireless subscribers at the end of 2012, while Kenya’s mobile- phone users increased 11 percent to 31.2 million from a year earlier, according to data compiled by Bloomberg.

Growth like that suggests that there is room for several brands to succeed, as more Africans switch from cheaper, so- called feature phones to more advanced devices that allow the user to access the Internet, Fuchs said.

“It’s not about us competing with other smartphones,” Fuchs said. “It’s about us showing to people that smartphones are a better choice than feature phones.”

To contact the reporter on this story: Christopher Spillane in London at cspillane3@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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