Analyst: Apple's iPhones still too expensive for emerging markets

The latest versions of the Apple iPhone went on sale in Italy, Russia, Spain and more than 25 additional countries on Friday, but analysts warned that the new iPhone 5s and 5c models are still too expensive in many emerging markets including Russia, which has just reopened its doors to the Apple smartphone after previously giving it the cold shoulder.

iphone 5c

iPhone 5C

Although the cheaper iPhone 5c is supposed to address a wider market, it is only around $160 (€116) less than the iPhone 5s in Russia and still equates to around the average monthly income in the country.

"If Apple really wants to compete with Samsung, it should've come up with a much lower price for the 5c," Simon Baker, an analyst at IDC in Moscow, told Bloomberg. "It's really a matter of what Apple wants: to have a really global product and retain market share as the smartphone market moves toward cheaper price brackets, or to focus on making the maximum profit."

(In a September interview with Bloomberg Businessweek, Apple CEO Tim Cook said: "We never had an objective to sell a low-cost phone. Our primary objective is to sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost.")

Bloomberg noted that Apple's share of Russia's smartphone market is about 8 per cent. as the device is only affordable for the very wealthy in the country. A major difficulty for Apple many emerging markets such Russia is that smartphones are not subsidised by operators, so the full price has to be paid up front. In Russia, phone subsidies are actually banned.

Baker opined that iPhones need to be cheaper to enable Apple to exploit the growing appetite for smartphones in emerging markets across the globe. Next week, the devices go on sale in a further 12 countries including India and Mexico. To be sure, Apple faces the difficult choice of maintaining its large profit margins or competing more aggressively with Samsung Electronics and other smartphone makers, but high prices could curb its sales.

Indeed, Russia's MTS has previously said that it has been decreasing the share of premium smartphones in its product portfolio and selling cheaper smartphones including MTS-branded Android devices in order to drive up average revenue per user. MTS, VimpelCom and MegaFon stopped selling previous versions of the iPhone because of Apple's stringent distribution conditions, and although they are now planning to start selling the latest versions only VimpelCom has so far signed a new distribution deal with Apple.

Nonetheless there are also examples of consumers in emerging markets who are prepared to spend a month's wages on an iPhone. For example, the gold-coloured iPhone 5s has proved particularly popular in China and other markets.

For more:
- see this Bloomberg article

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