Russia’s MegaFon Interested in Selling Xiaomi Phones

Corrected

Russia’s second-largest wireless carrier is interested in selling more low-cost handsets, including Xiaomi Corp. phones, as the Chinese brand plans entry to the country of more than 140 million where demand for cheaper smartphones is growing.

OAO MegaFon plans to expand its offering of budget smartphones, which are set to be in high demand in Russia this year as the country is on the brink of a recession, Aliya Beketova, a spokeswoman for the carrier, said by e-mail.

Xiaomi, founded in 2010, became the world’s third-largest smartphone brand after Samsung Electronics Co. and Apple Inc. in the third quarter, helped by its strategy to sell inexpensive devices online. In November, Beijing-based Xiaomi said it had postponed its entry to Russia and other markets until this year as it focused on boosting production.

The company was valued at $45 billion at a recent financing round led by billionaire Yuri Milner’s DST Global fund. The fund’s investors include billionaire Alisher Usmanov, who controls Moscow-based MegaFon.

Xiaomi’s focus on cheaper smartphones allowed the company to more than triple sales last year to 61 million units. It also produces tablets, Web-connected TVs and other devices.

Xiaomi isn’t in discussions with any mobile operators in Russia at this point, a company representative said by e-mail.

Costly IPhones

In Russia, the company will face competition from Apple, Samsung as well as cheaper local devices, including MegaFon’s own private-label budget smartphone and tablet brand Login.

Russia’s economic woes could help Xiaomi win users. The price of Apple’s iPhone surged almost 70 percent in Russian rubles in the fourth quarter, making it unaffordable for many customers. The ruble plummeted as falling prices for oil, Russia’s major export, compounded the effects of U.S. and European sanctions over Vladimir Putin’s incursion in Ukraine.

MegaFon is promoting cheaper smartphones and tablets to get more people to browse the Web wirelessly, boosting its data revenue. MegaFon is “quite successfully” selling phones from India’s Micromax Informatics Ltd., Beketova said.

Demand for smartphones is set to rise as about half of Russians still use so-called feature phones, which have fewer functions and less processing power, Beketova said.

The number of MegaFon customers using faster fourth-generation connections doubled last year, and they account for 40 percent of the carrier’s data traffic. The company is expecting more budget devices with 4G this year.