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Trump's ZTE ban forces rethink at Vodafone and Spark in NZ

Trump's ZTE ban forces rethink at Vodafone and Spark in NZ

Opportunity knocks for other manufacturers to grab ZTE's eight per cent-plus Kiwi market share

The US ban on China's ZTE is disrupting the New Zealand mobile market

The US ban on China's ZTE is disrupting the New Zealand mobile market

The possible failure of Chinese mobile phone maker ZTE will prompt strategy changes at Vodafone New Zealand, Spark and other local telecommunications providers, according to analyst firm IDC.

In April, the US Commerce Department banned ZTE from buying American components, such as Qualcomm semi-conductors, essential to the manufacture of their phones after determining the company had violated terms of an earlier sanctions settlement.

ZTE has been unable to continue production as a result and the effects of that will be felt locally, with both Spark and Vodafone offering rebranded low-cost ZTE devices to attract new customers.

"Since ZTE entered the market in 2009, manufacturing phones initially under the Spark and Vodafone brands the company has experienced strong growth, averaging 38 per cent growth in shipments per year, and by the end of 2017, ZTE devices were available from all major telco providers," said Alex Yuen, client devices analyst at IDC New Zealand.

Over the past five years, ZTE's Kiwi market share has grown from 2.5 per cent in 2014 to 9.4 per cent in 2017. In the first quarter of 2018, ZTE accounts for eight per cent of shipments.

ZTE NZ market share growth
ZTE NZ market share growth

That could be up for grabs, Yuen said, because the vendor's shipments are now suspended, meaning other providers, such as Alcatel and French-owned MobiWire, have an opportunity to make inroads.

Exactly how telcos manage the disruption could also affect their own growth and therefore future mobile service provider share.

Over the past five quarters, telco providers have been particularly successful at using low-end mobile devices to lure potential customers onto their network, Yuen said.

"Vodafone, in particular has been particularly successful in this space, driven by discounting their own-branded mobile devices in the below $100 space, a large portion of which are manufactured by ZTE," Yuen added.

All ZTE models currently in market are below $300, with 70 per cent of their shipments being priced between $50 and $100. 

Alcatel already manufactures low-cost mobile devices for Vodafone to rebrand and supplies Alcatel-branded phones to Spark.

Meanwhile, MobiWire manufactures low priced feature phone models such as the Hakan and Sakari, with the Kosumi smartphone model recently released by 2degrees.

The US ban is stated to be seven years. However, US President Donald Trump announced over Twitter on 14 May, that he and President Xi Jinping of China are working together on getting ZTE back into business.

Yuen said the political uncertainty means everyone in the market must wait and see how these sanctions transpire "with one eye on Donald Trump’s twitter account".


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