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February 18^th, 2019

As the penetration of smart feature phones increases across the world, new business and revenue opportunities will be created for the entire mobile value chain.

Over the next three years, nearly 370 million smart feature phones are expected to be sold across the world, according to the latest research from Counterpoint Research. This will introduce an entirely untapped customer base to high-speed internet, apps and services and in doing so, open a whole host of new business and revenue opportunities for the entire mobile value chain.

According to Neil Shah, Research Director at Counterpoint Research the revenue opportunity from increasing sales of smart feature phones is expected to be in the region of US$28 billion over the next three years. Shah adds, “This will be enabled by a potential of more than 300 million smart feature phone users globally by the end of 2021. Software & Services alone will contribute to 71% of this near- to mid-term revenue opportunity, or around US$20 billion.”

Exhibit 1: Global Smart Feature Phone Opportunity Revenues (US$, Billions)

A smart feature phone is a device with a traditional feature phone form-factor and design but with a chipset and an operating system which can support sophisticated smartphone-like features such as high-speed internet access along with an application and services ecosystem. A smart feature phone serves as a perfect middle ground between feature phone and smartphone reducing the barriers to access the digital world.

While the trend to migrate to smartphones is strong, less tech-savvy users and first-time users continue to prefer a feature phone form-factor and user interface (UI). In many African countries and India, literacy rates remain well below 70%. For users in such countries, moving to a smartphone is a steep learning curve which is why there are still two billion active users of feature phones across the world. This is the space that smart feature phones will enter.

“The global smart feature phone demand grew 252% year-on-year in 2018 – albeit from a low base, contributing roughly 16% of the total feature phone volumes. While India is the biggest contributor to this demand, major markets that have driven smart feature phone sales include the United States, United Kingdom, South East Asia and Africa. We estimate that smart feature phones will cross more than half of global feature phone volumes by 2021,” says Tarun Pathak, Associate Director at Counterpoint Research.

One of the key companies that has been driving this growth of smart feature phones is KaiOS. KaiOS is a software platform powering this new segment of phones and helping the digital inclusion of feature phone users with native support for 3G/4G networks as well as a curated app and services ecosystem. Over the last year and a half, eight KaiOS-powered devices have been launched with multiple models launching in 1Q 2019. These models have been launched across North America, Europe, Africa, South East Asia, and India.

Reliance Jio has been fastest to see the opportunity and adopt the platform to acquire tens of millions of 2G feature phone users to its 4G network with its KaiOS-powered 4G smart feature phone. The company’s Jio Phone, is the world’s leading VoLTE-supported KaiOS-based smart feature phone. It was launched at a price of US$20 and is the current exemplar of a smart feature phone value proposition and execution globally. Out of more than 100 million subscribers that Reliance Jio added since the Jio Phone launch in late 2017, the KaiOS powered 4G smart feature phone contributes close to half of those net additions. 

The largest beneficiary from the growth in smart feature phones will be network operators. Existing 2G customers can be moved to a more efficient 4G network. Network operators can then free-up the 2G spectrum and re-farm it for 4G, upcoming 5G or Low Power Wireless Access (LPWA) IoT networks. Further, as customers move to the 4G network, operators can drive voice as well as data revenues increasing their average revenue per user (ARPU).

“Perhaps the biggest benefit of 4G smart feature phone adoption for operators is the opportunity to accelerate the adoption of more efficient technologies with much lower cost/bit metrics with users on 4G/5G networks than on 2G/3G networks. Further, operators have the potential to drive voice as well as data revenues and, in the process, increase the 4G ARPU. It will help operators achieve a return on 4G equipment and network rollouts. We estimate close to US$ 15 Billion in connectivity service revenues will be generated, cumulatively, between 2019 and 2021,” says Varun Mishra, Research Analyst at Counterpoint Research.

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Background:

Counterpoint Technology Market Research is a global research firm specializing in Technology products in the TMT industry. It services major technology firms and financial firms with a mix of monthly reports, customized projects and detailed analysis of the mobile and technology markets. Its key analysts are experts in the industry with an average tenure of 13 years in high-tech industries.

Analyst Contacts:

Neil Shah
+91 993-021-8469
[email protected]

Tarun Pathak
+91 997-121-3665
[email protected]

Varun Mishra
+91 991-502-0142
[email protected]

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Picture Credit: Neil Palmer (CIAT): Flickr