Cell phones your wallet will love

By Elizabeth Woyke

updated 4:59 p.m. ET April 30, 2008

The Nokia 1200 will never win a beauty contest. Slightly clunky, with a basic candy bar shape, the phone is pure practicality, from its monochrome black-and-green screen to its plastic one-piece keypad. Industry commentators have been catty, describing it as "plasticky" and "sad-looking." But to Nokia, last summer's release of the 1200 has been one of its most important new launches.

Welcome to the era of the budget phone. From the vantage of phone companies, building low-priced phones has been a ticket to nontraditional markets in Latin America, Africa, India and Asia. But those markets may also turn out to offer clues about the future of phones in developed economies as well.

It's possible to find bargains in the U.S. So-called prepaid phones like the $29.99 LG Flare offered through Virgin Mobile forgo advanced features for affordability.

But traditionally, U.S. carriers have subsidized the price of higher-end cell phones and so dangled tempting handset deals before customers, aiming to coax them to sign up for multi-year service plans. There's no predictable rhyme or reason to those offers, which include deals like a BlackBerry Curve smartphone for $150 from AT&T or a $400 Palm Centro — and $300 rebate — from Sprint, for customers agreeing to a two-year service contract.

Operators in emerging markets tend not to underwrite phones, however. That's why most handsets from major manufacturers end up selling for $50 or more in developing economies, says Steve Lalla, Motorola's vice president of mass market products. (The prices quoted in this story are independent of subsidies and service contracts.)

And as U.S. wireless networks open up, prodded by the Federal Communications Commission's recent spectrum auction and open-source mobile platforms like Google's Android, the U.S. mobile market will look more like the rest of the world. That will mean more freedom to move between carriers, but also fewer carrier subsidies, which may make the price of phones more relevant to U.S. consumers.

What you can get for $50
As a result, emerging markets — and the phones popular there — are attracting more attention than ever. Nokia already racks up more than half its annual sales in emerging markets. Its weapon of choice? Phones like the 1200, which retail for as little as 35 euros or $55. "We believe people who earn less than $5 a day should be able to own a mobile phone," says Heikki Koivu, director of Nokia's entry products group.

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Around the world, $50 typically buys a sturdy, mostly plastic phone that makes and receives calls and text messages and has decent battery power. Manufacturers carefully weigh the cost of each feature. Cell phone makers will save a few pennies on materials by building phones out of sturdy plastic instead of metal.

But low cost doesn't mean the phone will fall apart. If anything, low-cost cell phone makers figure their products will have to last even longer than luxury phones, which may get tossed aside as consumers spring to buy the latest model. Koivu says Nokia tries to build phones that will last at least three years by using dust and moisture-resistant keypads and avoiding cheap ink on the keys — it rubs off too quickly. Shaping the phones in the simple candy bar or block form is easier to manufacture than phones with hinges and moving parts — but also makes the device hardier.

Battery life is key, too, because customers in emerging markets might not have regular access to electricity. "Many of [these customers] are out and about somewhere," says Koivu, adding that he's spotted people charging their phones using car batteries. Some low-cost phones, such as Samsung's B100 and C188, will last more than 400 hours in standby mode.

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