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Chinese rival puts heat on RIM for key African sales

BlackBerry Bold. Research In Motion is facing tough competition in key African markets from upstart Chinese rival Huawei.

Fred Lum/The Globe and Mail/Fred Lum/The Globe and Mail

The Chinese are coming, and they're taking dead aim at one of BlackBerry's most lucrative markets.

After racking up huge sales in its debut in the African smartphone market this year, Chinese manufacturer Huawei is planning a full-scale assault next year on South Africa – a key market for Research In Motion Ltd.

With its cheap $100 Android-powered devices and its alliance with Kenya's leading mobile phone company, Huawei was able to capture more than 50 per cent of Kenyan smartphone sales this year, from a standing start.

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As it expands across Africa, the Chinese company could begin to erode BlackBerry sales, even without targeting the high-end corporate market where BlackBerry is still strong. Many African consumers are reconsidering their commitment to BlackBerry after the three-day outage that shut down service to BlackBerry users last month – just at a time when BlackBerry was beginning to seize control of the African smartphone market.

Africa has emerged this year as one of RIM's fastest-growing revenue generators. Shipments of its BlackBerry devices in Africa soared by an astounding 741 per cent, year-over-year, in the third quarter of this year, according to research firm Canalys.

Within the African continent, one of the biggest consumer markets is South Africa, where BlackBerry already dominates the smartphone sector, with an estimated 60 to 65 per cent of the country's monthly sales this year.

South African research firm World Wide Worx estimates there are more than 2.5 million BlackBerry devices in South Africa, nearly half of the total number of 6 to 7 million smartphones in Africa's wealthiest country.

Even if BlackBerry continues to dominate sales to business executives here, it could be vulnerable in the cheaper end of the South African market. Many of its customers were lured in by a fixed-price fee of about $7 a month for unlimited data and messaging, which is especially attractive for young people who are addicted to instant text messaging.

BlackBerry Messenger became the fastest-growing social network in South Africa in the second half of this year. Teenagers often bought BlackBerry devices for instant messaging and then dragged their parents into the market. But this popularity could be eroded by the imminent arrival of low-cost Huawei devices and the simmering anger over the BlackBerry outage in October.

"Huawei will try to shake up the market," said Arthur Goldstuck, head of World Wide Worx. "There's no question that the momentum of BlackBerry will slow down next year. It will remain the dominant brand for the months to come, through the first half of next year, but not beyond that."

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Mr. Goldstuck predicts that BlackBerry's slippage will accelerate in South Africa in 2013. A large number of its two-year contracts will come up for renewal in the second half of next year, and many customers may switch to Huawei or other competitors, he said.

BlackBerry's big advantage is that it remains the "aspirational brand" in Africa, a status that Huawei is unlikely to threaten, he said. But RIM must ramp up its application options and improve its operating system, or its users will become increasingly frustrated, Mr. Goldstuck said.

Huawei, meanwhile, has also entered the Nigerian market in the second half of this year, using a $1-million advertising campaign to promote its smartphones to Africa's most-populous country. And it plans to enter at least six more African countries in the near future.

Huawei has already risen to become one of the world's top sellers of network equipment. Now it is expanding into cellphones and tablets, and it aims to become one of the world's top five cellphone makers within the next five years. It has forecast sales of 60 million cellphones this year, including 15 million smartphones.

Nigeria, with its huge population, will be a valuable market for whichever company wins the battle. So far, BlackBerry has been the leader. Its fashionable status was symbolized by a new "Nollywood" movie, BlackBerry Babes, about the lifestyles and relationships of the nouveaux riches.

Mobile phone use has exploded in Africa over the past decade, with more than half of its billion people now owning cellphones. But many Africans are now switching to smartphones. In South Africa, for example, smartphone sales will overtake the sales of ordinary cellphones within the next 18 months, Mr. Goldstuck said.

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In a bid to exploit this trend, RIM is introducing cheaper, smaller versions of its Bold and Curve models, specifically aimed at booming markets like Indonesia, Nigeria, Thailand and the Philippines. Some of its devices are priced as low as $200 in Indonesia, where RIM has already sold 6 million devices.

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About the Author
Africa Bureau Chief

Geoffrey York is The Globe and Mail's Africa correspondent.He has been a foreign correspondent for the newspaper since 1994, including seven years as the Moscow Bureau Chief and seven years as the Beijing Bureau Chief.He is a veteran war correspondent who has covered war zones since 1992 in places such as Somalia, Sudan, Chechnya, Iraq and Afghanistan. More

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