Cheap and cheerful-economy handsets enter the market: though only one year old, a South Africa-based mobile handset company appears to have hit the market jackpot by catering to the often cash-strapped youth of Africa. Christina Kennedy reports on Mi-Fone's staggering success.

Mi-Fone turned one year old in April 2009, but has already started capturing market share with its range of affordable, style-oriented phones targeted at the fashion-conscious urban youth who may not have wads of money to spend, but want their mobile phone to reflect their lifestyle.

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The man behind Mi-Fone (BVI) Limited is Alpesh Patel, the company's founder and chief executive officer.

During his time as Motorola's sales director for Africa and the Middle East, he was responsible for shipping more than six million handsets to the area in a three-year period, taking the brand to number one market share position in several key African markets.

Gap in the market

Spotting a gap in the market, last April he launched the "Mi" brand of mobile devices, all retailing for under $100 (with most priced below $50), thereby effectively creating a new marketing category in the telecoms sector.

Patel started shipping phones to 10 African countries and to two major GSM operators, and Mi-Fone entered into a joint venture with the Heritage Group targeting the Indian, Nepalese and Commonwealth of Independent States markets.

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More than 100,000 units have been sold to date and revenues of $2.4m were achieved by the end of 2008 - not bad for an previously unknown brand in the highly competitive mobile phone sector.

Patel says that other handset brands have attempted to penetrate the

mass market sector in Africa, but have failed because "the products were sold simply on price without any extra initiatives". Many companies have shied away from this market segment because of the risks posed by high operational overheads.

"Mass market sectors represent the bottom of the pyramid," he says. "Yes, there is less disposable income per person, but there is a massive volume base to address. It's a high-volume, low-margin sector."

Basic but reliable

Mi-Fone's devices are not the flashy, high-end smartphones so coveted by yuppies around the world, but are instead basic, reliable phones for talking and texting, with decent battery life - and they don't look shabby, either. The company is also developing a solar-powered phone - a promising concept on a continent where sunshine is abundant, but electricity supply is erratic.

Operating in such a sector means that effective marketing is critical. Recently, Mi-Fone devised the Mi-Obama limited-edition handset, a fun initiative for the Kenyan market to celebrate US President Barack Obama (whose father was Kenyan) taking office.

The 5,000 Obama-themed devices sold out within weeks of being launched in January, but the real value for the company lay in the spinoff media and word-of-mouth coverage the novelty initiative aroused.

Mi-Fone is tapping closely into the youth market, and one of its projects is sponsoring Emcee Africa, a reality hip-hop talent search series that starts airing on DStv's Channel 0 this month (May).

The television show ties in with its corporate social responsibility programme, using the Mi brand to encourage young people to take charge of their sexual health. The company will be distributing tens of thousands of free Mi-Choice condoms at Emcee Africa events.

Small guy with big heart

Expansion is on the cards, with Mi-Fone in a bid to extend the company's reach in the lucrative Middle East and North African (MENA) region.

Patel explains that the younger generation "have grown up over the past 12-odd years with mobile communications. So this has become part of their lifestyles."

Many people associate low-cost units with being cheap, of poor quality and unreliable. Patel disputes this assumption when it comes to Mi products. "Studies clearly show that low-tier handsets have very low failure rates when compared to the $200+ handsets," he points out. "In fact, expensive phones tend to break down more often in terms of software issues and so on."

Because Mi-Fone's primary focus is the mass market, he asserts, it is in the company's best interests to invest heavily in the sector to deliver low-cost, feature-packed phones that last a long time, as well as offering a comprehensive warranty and after-sales programme.

While the global economic crisis is biting indiscriminately, Patel says an interesting phenomenon is emerging: in developed countries such as the US, people are increasingly 'going back to the basics' and eschewing fancy phones with features they seldom use.

And in Africa, even though Mi-Fone targets the mass market sector, a growing trend is for professionals to purchase Mi-Fones to use as their secondary phones.

With Mi-Fone entering the second quarter of 2009 with a bang, expanding rapidly and introducing products such as a $15 handset and a GPRS Bluetooth phone for under $30, it would appear that the mobile phone giants have underestimated the business potential of catering for the so-called 'poor Africans'.