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RIM Taps Emerging Markets Messaging Mania to Top Apple

A Research In Motion Ltd. (RIM) Blackberry Curve 8520 mobile phone.  Photographer: Daniel Acker/Bloomberg
A Research In Motion Ltd. (RIM) Blackberry Curve 8520 mobile phone. Photographer: Daniel Acker/Bloomberg

The iPhone was an also-ran for Monica Amilpas when she chose her first smartphone last year. She opted for the BlackBerry Curve because it had an instant-messaging feature the Apple Inc. device lacked.

“BlackBerry Messenger has helped me a lot because the little messages are free,” said Amilpas, 31, who works at a consulting firm in Mexico City and stays in touch with clients, colleagues and family through BBM, as it’s known. “Before I had to use text messages, but this doesn’t cost anything.”

The messaging feature and lower-cost phones have boosted the popularity of Research In Motion Ltd.’s BlackBerry in the developing world, making it the top smartphone brand in Latin America this year, researcher IDC says. RIM is relying on emerging markets for revenue growth as competition from Apple and Google Inc.’s Android cut into its U.S. and European sales.

While the iPhone has won market share in the U.S., its price tag of about $700 puts it out of reach for people in Mexico, Brazil, India and Indonesia, where most users prepay for mobile service because they lack the credit to qualify for contracts that offer subsidized phones.

At an America Movil SAB store in Mexico City, the Curve costs 3,339 pesos ($273) without a contract, compared with 9,359 pesos for the iPhone 4. Eighty-six percent of America Movil’s clients prepay for service, according to the carrier, Latin America’s largest.

Besides luring consumers with lower pricing, RIM has won over wireless-service providers who like the BlackBerry’s data compression, says Kevin Restivo, an analyst at IDC in Toronto.

“What RIM has done really well is create a device for all users,” he said. “RIM has some very distinct advantages that people tend to overlook, advantages that attract carriers.”

Lower Phone Bills

RIM ran an international advertising campaign this year that featured tag lines like “Conversations come naturally on BBM,” touting the service as a way to stay in touch more cheaply than calling and more quickly than texting.

The company, based in Waterloo, Ontario, announced plans in March to start manufacturing the entry-level Curve in Brazil to eliminate import tariffs that can be as much as 30 percent. The Curve already costs about $340 less than the iPhone over the life of a two-year contract in Brazil, according to Morgan Keegan & Co., a significant saving in a country where the average monthly wage is about $900.

Teenager Messaging

While RIM’s entry-level Curve lacks the touch screen and movement sensors that have helped sales of the iPhone, those features have been incorporated into the Torch, introduced in August. The Torch, though, sells for 9,759 pesos in Mexico City, even more than the iPhone 4.

For now, customers like Amilpas are buying the Curve because it provides a cheaper, faster way to communicate, which she says is more important than playing games or Web surfing.

RIM surpassed Nokia Oyj in Latin America in the first quarter to become the region’s top smartphone maker and had 39 percent of the market last quarter, according to research firm Canalys in Reading, England. Apple wasn’t among the top four.

Rick Costanzo, RIM’s regional managing director for Latin America, says the BBM service has unique features that have played a big role in RIM’s success.

“A 15-year-old boy who likes a 15-year-old girl, sends her a BBM and he’s able to measure how important he is to her based on the speed of response after the letter turns to an R,” meaning it’s been read, he says. “No one else runs an end-to-end service plan like we do. That’s killer and is why it’s almost a social phenomenon.”

Status Symbol

In Venezuela, BBM and the BlackBerry enjoy a status similar to the iPhone’s in the U.S. The device even earned an endorsement from President Hugo Chavez, who on national TV called his BlackBerry and Twitter account “my secret weapon.”

“BBM has really hit the mark there and the BlackBerry is almost like a club there, where status is about communicating by BBM,” said IDC’s Restivo.

BBM is also popular in socially conservative Saudi Arabia where its speed -- messages are typically sent in less than two seconds, according to Morgan Keegan -- has made it a way for teenagers to communicate in a country where religious police bar unmarried couples from meeting in public. The growing use of BlackBerrys by young Saudis has been criticized by supporters of the country’s traditional Islamic rules, who this year welcomed a threatened ban on RIM’s messaging service in the country.

In the Asia-Pacific region, excluding Japan and South Korea, RIM’s smartphone market share expanded in the third quarter to 6.2 percent from 3.8 percent a year earlier, while second-place Apple remained at 9.6 percent and leader Nokia fell to 64 percent from 73 percent, according to Canalys.

Replacing Calls

RIM shares rose 63 cents, or 1.1 percent, to $59.07 at 4 p.m. New York time on the Nasdaq Stock Market, cutting their losses this year to 13 percent. Apple has risen 50 percent, and Nokia has declined 14 percent in Helsinki trading.

In many emerging markets, which have high mobile calling costs, BBM’s speed has turned the service into a substitute for phone conversations, says Morgan Keegan’s Tavis McCourt, who published the study on the BlackBerry’s data cost savings.

“Your average person in Brazil is paying 40 cents a minute for voice -- prepaid or postpaid. It’s not like in the U.S.,” says the Nashville, Tennessee-based analyst, who rates RIM shares “outperform.” “It wouldn’t be as successful as it was if people weren’t replacing voice minutes with it.”

‘Sticky’ Services

BBM also helps RIM sell phones because it can’t be used on other devices, said Chris Jones, a Canalys analyst. That’s important to sustaining growth in emerging markets when RIM is losing market share in the U.S., he says. RIM’s sales outside the U.S. climbed 94 percent last quarter from a year earlier, while U.S. revenue slipped 2.9 percent.

“BBM for BlackBerry is a major opportunity to create sticky devices and sticky services,” Jones said, referring to the company’s ability to hang on to its customers.

The stickiness will be tested as awareness of the iPhone and Android devices increase in emerging markets. Amilpas, for one, says her love of BBM means she’ll stay loyal to BlackBerry for her next smartphone.

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