Reports out of Egypt and Indonesia indicate that the Android smartphone operating system is continuing to grow in popularity, with savvy industry participants taking increasing advantage of that trend. In Indonesia, a country that has been one of the last redoubts of strength for embattled RIM, Android has surpassed BlackBerry to achieve 52% market share. As a result, manufacturers of Android-powered smartphones such as Samsung, Sony and HTC have been doing strong business in Indonesia in the last quarter. In Egypt, mobile operator Mobinil has been aggressively promoting Android, not only by offering subsidies on devices, but also with discounts on monthly subscription fees. While Mobinil features the popular high-end Samsung Galaxy SIII, it also puts its brand name on other Android phones at lower price points.
While Apple is grabbing headlines with the release last week of the iPhone 5, mobile service providers should keep in mind that Android is solidifying its lead among smartphone operating systems – and that they can profit from this fact. Recently we wrote about the way Apple is putting operators in a difficult position: While the iPhone’s popularity can be a boon to subscriber growth, the high price of subsidizing it can cut into operators’ margins, cash flow and profitability for a considerable period of time. In some cases, it can take up to nine months to recoup costs associated with iPhone subsidies. Android devices, on the other hand, become profitable far sooner, due to their lower costs. In our opinion, providers should take a page out of Mobinil’s book and emphasize discounts on monthly fees in addition to device subsidies. By setting the monthly charges for Android devices lower than those for the iPhone, we believe operators can drive a considerable portion of the customer base to the more profitable Google-powered alternative.
While Apple may have iconic brand status and a cult-like following, we don’t consider the iPhone to be superior in features and functionality to Android devices. In fact, we view Google as every bit the innovator Apple is. With a touch-screen interface of similar quality on equally high-grade screens, plus access to a sizable array of apps, the Android system is more or less equivalent to iOS, and more than sufficient to meet the needs of even the most demanding users. For those potential subscribers who are not necessarily iPhone die-hards, we think lower monthly fees for Android devices could be a persuasive way to overcome (or at least put a splash of cold water on) the intoxicating allure that Apple has among users.