MTN’s $50 Steppa smartphone changes (almost) everything

It’s been astonishing to see how quickly mobile operator MTN’s Steppa smartphone has been written off, when the devices have hardly made it to retail stores.

This is a sub-$50 smartphone. A phone that retails for R499.

By comparison, the BlackBerry Curve, a phone that South Africa was (and still is) addicted to, sells for closer to four times as much. The newer 9320 (which has 3G) sells for a little more, while the original 8520 – the most popular phone in South Africa at one stage – sold for a little bit less.

By comparison, Nokia’s entry-level Asha 210 device retails for double the cost of the Steppa, but crucially doesn’t have 3G. Even Vodafone’s sub cheapest smartphone — the Holy Grail for subsidiary Vodacom as far back as 2010 — can’t compete on price. This is a phone built at scale through Vodafone’s global procurement process.

MTN’s changed all that. It’s had to. US$99 remains too steep a retail price in Africa and the Middle East – regions where MTN operates. It’s telling to understand just how MTN has managed this. Instead of going it alone or picking a form factor and feature set from a Asian contract manufacturer, it’s used a reference design from chipmaker Qualcomm.

Qualcomm’s stuck in a corner. It makes the processors and radios that power hundreds of millions of phones (if not billions). And it’s very profitable. It can’t enter higher margin business (like making its own handsets) without alienating its customers (the OEMs like Samsung, Nokia and HTC). So why not work with mobile operators? Hence, its reference design programme.

It says to date there have been 350 reference design-based products launched together with 40 OEMs in 18 countries. The MTN Steppa is surely one of the most high-profile of these recently.

The automatic criticism of the Steppa is that it runs (a customised version of) Android 2.3.5 (Gingerbread). The OS itself is three years old (it’s a year older than the original Gingerbread release). Commentators and analysts have been publicly horrified that MTN would launch a device running such an “antiquated” operating system. Again, compare this experience to BlackBerry’s OS7. Or the S40 OS running on Nokia’s Asha phones. It’s hard to argue that an experience on Gingerbread will be inferior.

This needs to be seen from the perspective of the consumer a device like this is targeted to. When considering any phone, people ask: ‘What can the phone do?’ And for this target, connectivity is important. These are people who have happily bought BlackBerry Curve phones in the past because of what they’re offered – all-you-can-eat connectivity (chat, e-mail, web) at a low cost, albeit with a noticeably sub-standard browser.

MTN gets this: it says it “assessed what users do on their smartphones, and designed a device which serves these needs.” The Steppa is not an iPhone. It’s not a Samsung Galaxy. It’s not meant to be.

But, it offers 3G (a big deal) and Opera Mini, Gmail, Google Maps, YouTube, Google Talk, Facebook, Twitter, News24 and WhatsApp are pre-loaded on the device.

The questions being asked of MTN by consumers are telling. Everyone wants to know if it “runs BBM [for Android]”. It doesn’t (yet). But BlackBerry has confirmed it’s readying a special release of BBM that runs on Gingerbread.

If MTN is smart, it will sell this fact hard when this version of BBM is released (my bet is it will). Push BBM availability on this device hard and the BlackBerry Curve will become practically irrelevant. (The Steppa also runs Mxit – another question asked by consumers.)

Beyond a device that’ll (no doubt) be popular among certain segments of MTN’s subscriber base, the Steppa also fulfills another important role. It’s a peg in the ground for OEMs. A target.

It knows that to compete in the mass lower-middle market, it has to get its pricing down to this level. Yes, MTN is sacrificing margin on these devices to force the price lower than it should ordinarily be, but that’s the point. That target comes with some decent pressure too.