ZTE: Affordable, Unlocked Phones To Rise - Twice

ZTE: Affordable, Unlocked Phones To Rise

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ZTE USA, though not among the top five in U.S. installed- base market share, has been making moves to expand its share, and it believes the wind is behind its back now that carriers are turning away from their subsidized handset business model.

For the three months ending October, ComScore reported that 193.9 million people in the U.S. owned a smartphone, and HTC ranked fifth in installed-base share at 3.3 percent.

To build awareness to break into the top five, ZTE has become the official smartphone of multiple NBA teams, the latest of which is the Chicago Bulls. In 2014, ZTE became the official smartphone sponsor of the New York Knicks and Golden State Warriors, and in 2013, it extended an existing sponsorship with the Houston Rockets for another year.

The brand also entered the U.S. unlocked-phone market in 2015 to further expand its share.

With the near-demise of handset-subsidy programs by carriers, ZTE believes its focus on affordable smartphones will carry its sales to new heights since its 1998 launch.

Here’s what Andrew Elliot, ZTE USA VP of strategic marketing for mobile devices, had to say about the changing U.S. market and ZTE’s prospects in the U.S.

INDUSTRYWIDE OUTLOOK

TWICE: What are expectations for U.S. industrywide smartphone sales in 2015 and 2016?
According to Strategy Analytics, in the second quarter of 2015, smartphone sales volume increased approximately 10 percent year over year in the U.S. ZTE’s business has also grown 69 percent year over year in U.S. shipments overall, and ZTE expects its growth will continue.

TWICE: Is growth slowing or holding steady for the industry as a whole in the U.S.?
For ZTE USA, growth is expected to continue. A large part of ZTE’s success is working with key channel partners. ZTE USA currently is selling products across all the carriers, and large retailers like Walmart, Best Buy and B&H, while also increasing its presence with online channels like Amazon, eBay and Newegg.com

TWICE: Have carriers’ no-subsidy installment-payment plans impacted U.S. shipments? Are replacement rates slowing because of the plans, or accelerating?
Our focus is on making sure we design a solution that consumers value, want and will use at more affordable prices. This is a strategy that is working for us as we sell unlocked devices directly to consumers, and it nicely supports the efforts of our carrier partners as they look to add new subscribers. The move to offer installment payments and participate in the benefits of driving more frequent upgrades with leasing plans — something ZTE is offering to its consumers on all of its unlocked devices — will provide revenue opportunities overall. Strategy Analytics estimates that 76 percent of all smartphones will be under an EIP [equipment installment plan] this year, significantly up from 52 percent in 2014.

TWICE: Will leasing have a positive impact on shipments as consumers lease new models (to replace the model for which their current lease expired)?
The trend seems to show that subsidies are becoming smaller and smaller. This really supports ZTE’s efforts to deliver premium experiences at affordable prices that we believe will make our products more appealing.

Given Apple’s huge influence, Strategy Analytics expects upgrade and leasing will achieve healthy adoption in the U.S. However, it is difficult to determine how the market might ebb and flow based on several factors, such as consumer familiarity or overall benefits.

NO-SUBSIDY IMPACT ON SALES MIX

TWICE: With subsidized-phone programs going away, what has been the impact on the mix of phones purchased by consumers? Are consumers stepping down to less-expensive phones, and are average prices slipping as a result?
Leasing and EIPs take smartphones back to their “real” values rather than subsidized prices, which will make cost-sensitive consumers search for alternative or more affordable options in open and online channels. More American consumers will start to realize, understand and embrace the benefits of unlocked smartphones.

ZTE’s goal is to make sure whenever someone walks into a carrier store or shops online, they can have the latest premium smartphone technology, at all pricing levels (entry, mid- tier and flagship), at an affordable price. We are a leader in delivering premium features, materials and design within the low-cost phone market – and we will continue to push what is possible.

TWICE: Do you foresee suppliers leaving the U.S. market in 2016?
ZTE currently operates in more than 160 countries around the world. As a global brand, ZTE believes it’s crucial to be successful in one of the most dynamic markets in the world, the U.S. ZTE has enjoyed significant growth in the handset market over the past five years, and we expect that to continue to grow.

UNLOCKING POTENTIAL

TWICE: Multiple suppliers have begun selling unlocked phones direct to consumers or through retailers. Is the unlocked market growing in the U.S.?
Unlocked smartphones in the U.S. are a high-growth, high-value market that no vendor or operator can afford to ignore. The unlocked smartphone market across the United States has been growing rapidly in recent years. The “unlocked” smartphone market across the United States will grow an impressive 43+ percent in 2016, according to Strategy Analytics. It estimates unlocked models (through official channels) accounted for 1 percent of total smartphone volumes in the U.S. in 2012, 4 percent in 2014, 7 percent in 2015, and 16 percent by 2020.

TWICE: What is the advantage to a supplier in selling unlocked phones direct to consumers or through retailers?
We realize the importance of building relationships directly with the consumer, and one way in doing that is selling unlocked phones directly to them. Through this type of engagement, among many other ways, we can develop a consistent dialog directly with our consumer, which ultimately impacts how we imagine, design and deliver our products.

TWICE: Are there advantages to phone suppliers offering their own installment-payment plans?
We introduced a leasing option because we believe advanced mobile technology should be available to everyone. We also want the experience of purchasing and using a ZTE device to be easy for any consumer. How customers want to pay versus the amount they are comfortable paying are equally important — and ZTE can provide the best of both worlds.

TWICE: Describe the U.S. smartphone market in five years.
As more and more devices across many segments are becoming connected to the IoT world, smartphones are emerging as the most important means of controlling this growing market of connected devices. Smartphones have integrated a significant amount of computational power, coupled with a simple and intuitive UI as well as a wide range of radio technologies (4G, Wi-Fi, Bluetooth, NFC) to connect you to just about any network and device. And this is the reason ZTE has just recently launched our global flagship smartphone, Axon, which means “nerve center,” because we believe that smartphones will serve as the nerve center of everything we do now and into the future.  

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