South African smartphone sales climbed 28% year-on-year to three million units in the third quarter of 2017.
This is according to point of sale tracking data from market research firm GfK South Africa. It says basic mobile phone sales were up 6% to 1.6 million units for the same period.
Smartphone revenue was up 27% compared to the same quarter in 2016, as the market accelerated its transition from basic phones, says GfK.
For the year to the end of the third quarter, smartphone sales are up 21.1% and smartphone revenue is up 8.1%, it adds.
The market research firm says the smartphone market in 2016 grew 5.2% in value and 10.5% in units in 2016, compared to the year before. Basic phones dipped 13.7% in unit sales and 1.9% in revenue. However, basic phones still command a 35% share of the market.
"Mobile operators are on a drive to boost data usage to compensate for a steady decline in voice revenues," says Nikolay Dolgov, general manager for point of sales tracking at GfK SA.
"Falling prices of smartphones, aggressive operator promotions and growing WiFi/4G penetration are all helping to speed up the adoption of smartphones in South Africa."
He is of the view that smartphone penetration remains relatively low (about 54% for SA) because basic phones are still cheaper than entry-level smartphones.
"The gap is not being bridged fast enough for the rise in smartphone adoption to match the decline in basic phone sales. To add to this, the average lifespan of a smartphone is about three years."
GfK points out that fierce competition from Chinese brands is reshaping the entry-level smartphone market in SA, with the average selling price for smartphones falling despite the weakness of the South African rand.
Around 25 brands are today contesting the entry-level smartphone market, compared to just six in 2013, it notes.
The firm says while owning a smartphone is becoming more affordable, smartphone penetration in SA nonetheless remains low, and there is still scope for growth. However, top brands are continuing to move out of the entry-level segment as the Chinese brands strengthen their grip on the market.
Norman Muzhona, senior product manager of telecommunications at GfK SA, expects the year to end on a strong note as Black Friday and festive season offers kick in. "Many of the seasonal offers may focus on data and value-added services for existing prepaid users and subscribers rather than on device discounts. Smartphone sales and revenues are likely to grow in double digits in 2018."
He believes South African 4G and WiFi penetration will grow significantly over the coming years. E-learning, e-health and e-governance are taking off in SA, all pointing to robust growth for smartphone sales in the years to come, Muzhona notes.
GfK data shows there are now almost three times as many smartphones in SA than there are television sets. This suggests brands should re-evaluate their marketing mix and allocate more budget to mobile, especially if their spending is largely focused on TV, it urges.
"As competition continues to grow in the entry-level market, we expect the price gap between basic phones and smartphones to narrow. Basic phone sales will eventually plateau as the demand for a second device with basic phone functionality will keep that market alive," Dolgov concludes.
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