Thursday, April 14, 2011

Gray-Market Handsets Continue to Plague AME Mobile Markets, Pyramid Finds

• Gray-market handsets are cell phones manufactured in China that are not recognized or licensed by government regulators. Makers of these products generally do not pay China’s value-added taxes and, therefore, profit illegally from their participation in the market.

• China’s gray-market cell phone shipments will amount to 255 million units in 2011, up 11.8 percent from 228 million in 2010. This compares to a rise of 43.6 percent in 2009.

13 Apr 2011 18:00 Africa/Lagos

Gray-Market Handsets Continue to Plague AME Mobile Markets, Pyramid Finds

PR Newswire

CAMBRIDGE, Mass., April 13, 2011

CAMBRIDGE, Mass., April 13, 2011 /PRNewswire/ -- The number of gray market handsets sold across AME will remain steady through 2015, however the sharp increase in legitimate handset sales during that period will reduce the percentage of gray market handset units sold in AME to 13 percent, according to a new report from Pyramid Research (

Squashing Gray Markets for Mobile Handsets describes the reasons behind the emergence of gray markets in the African handset markets and addresses some initiatives by handset manufacturers, network operators and government agencies to counteract these trends. It observes that concerted efforts are necessary if gray markets are to be challenged and provides examples from Turkey, Nigeria and South Africa to illustrate the arguments in more detail.

Download an excerpt of this report here:

Purchase the report here:

"Pyramid believes that shrinking gray markets in Africa depends on manufacturers and operators providing the right incentives for end users to buy authentic handsets, rather than solely branding gray markets as illegitimate," says Kerem Arsal, Analyst at Pyramid. "This requires handset manufacturers to work with network operators to develop affordable handsets, while government agencies should implement policies to encourage the sale and domestic distribution of legitimate handsets," he indicates.

Many African end users can afford only the cheapest of handsets. "Even in cases where income is not an immediate obstacle, limited mobile network capabilities in most markets suggest that phones that are rich in features are not urgently needed," says Arsal. "In response to the gray market handsets, handset manufacturers are aiming for clever combinations to appeal to end users by providing affordable and simple phones, while staying more in touch with the usage realities of the African markets when coming up with relevant features," he adds.

"In African markets where mobile operators have a degree of subscriber loyalty, they should be employed as the primary channel for handset distribution," Arsal says. "Where mobile operators achieve some degree of loyalty, then handset manufacturers are better off using network operators' channels at the expense of sharing some revenue," he notes. "In fact, any loss of revenue due to selling indirectly can easily be counteracted by the scale and certainty provided by powerful mobile operators, as well as by recovering the loss of market share to gray markets," Arsal adds.

Squashing Gray Markets for Mobile Handsets is part of Pyramid Research's Telecom Insider Report Series and is priced at $595. Download the excerpt here: It can be purchased online here ( ) or by emailing us at

Contact: Jennifer Baker, +1-617-871-1910,

SOURCE Pyramid Research

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