Page 132 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

in these areas. In Zimbabwe, smartphones dominate urban markets, with feature phones the plurality in
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rural areas. 11

GSMA statistics for Asia-Pacific show an almost even split between smartphones and basic/feature phones of
45% to 41%, and estimating that by 2020, smartphones will be 65% of these market. 12

However, manufacturing data indicates persistent increases in production of critical feature phone components,
which means that reduction in feature phone penetration predicated by analysts is likely to be delayed well
beyond 2020. Indeed, large DFS markets such as India are seeing a large increase in feature phone production
by local manufacturers and increases in import by others. Smartphone sales growth was in India was an
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average 8% during the course of 2016, down from a spirited growth of 29% in 2015. 14
Globally, the flat – and sometimes decreased – growth in smartphone penetration could be due to saturation
of smartphones in its core base of urban areas, and increase in DFS in rural areas where feature phones still
predominate because of user preferences by low income users for features such as device durability, low
retail cost, good speakerphones and week(s)-long battery life. Notably, these features are however difficult
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to achieve (even) with low-end smartphones, such that the average lifetime of use of a feature phone has
risen to 490 days, up from 470 days.
16

4 Taxation and handsets

Prices for phones and access may however be effected by the increased tendency by some regulators to tax
mobile phone imports and mobile phone airtime. In July 2015 for example, handset prices increased after the
federal government doubled the general sales tax on all types of imported mobile phones. Similarly, Ghana
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imposed a 20% duty on handset imports for a total of 24.5% of the cost of mobile ownership, a tax burden
almost as high as that on wines and spirits. The Jordanian government imposed a 45% tax on mobile airtime.
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While tax increases on mobile handsets appear to be a general trend, the Indian government bucked the trend
by cutting import tariffs on handsets from 29.5% to 12.5%. For many in the mobile industry, high import
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duties and local taxes are seen as counterproductive since they encourage the dominance of feature phones
and encourage smuggling of devices, leading to total loss of customs revenue. 20

10 Deloitte (2016) Game of Phones: Deloitte’s Mobile Consumer Survey. The Africa Cut 2015/2016, available at https:// www2.
deloitte. com/ content/ dam/ Deloitte/ za/ Documents/ technology- media- telecommunications/ ZA_ Deloitte- Mobile- consumer-
survey- Africa- 300816. pdf
11 ibid
12 GSMA (2016a) The Mobile Economy – Asia Pacific 2016, available at: http:// www. gsma. com/ mobileeconomy/ asiapacific/
13 As noted in the India Times, India’s second largest handset maker, Intex Technologies shipped 3 million feature phones in
January-March 2015, 5.4 million in the third quarter of 2015, and 4.4 million units by the end of March 2016, nearly double its
smartphone production. India Times (2016) Smartphone Sales Drop, Users Await Affordable Options, available at http:// ecoti. in/
nVfcJY
14 Indian Times (2016) Feature Phones Will Continue Dominating Indian Markets In 2016, available at http:// ecoti. in/ aFWLta
15 India Times (2016) ibid
16 ibid. Primarily in India, but this appears to be a global trend.
17 Express Tribune (2015) 100% increase in tax on mobile handsets, available at: http:// tribune. com. pk/ story/ 898747/ 100- increase-
in- tax- on- mobile- handsets/
18 Deloitte (2016) Digital Inclusion And Mobile Sector Taxation In Ghana, available at: http:// www. gsma. com/ publicpolicy/ wp-
content/ uploads/ 2016/ 09/ GSMA2015_ Report_ DigitalInclusionAndMobileSectorTaxationInGhana. pdf
19 BGR (2016) Government Rolls Back 29.44% Import Duty On Mobile Phone Components, available at: http:// www. bgr. in/ news/
government- rolls- back- 29- 44- import- duty- on- mobile- phone- components/
20 See CITIFM (2016) Telecom Analyst Demands Tax Cuts On Imported Phones, available at https:// shar. es/ 1D8yJW

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