The key consumer behavior trend in Q2 2017, arising from MTS Retail analysis, was growth in demand for advanced smartphones priced over RUB 40,000. Consequently, against the background of increasing interest in this category of devices, 60% of high-end smartphones in the MTS retail network were bought on credit.
In Q2 2017, the share of smartphones over RUB 40,000 bought on credit doubled from 32% to 60%. Overall, the sales of smartphones in this category grew 49.5% in revenue and 48.5% in unit terms.
The overall share of affordable as well as premium category smartphones sold in the MTS retail network increased to 20% of sales in unit terms (+6 p.p.) and 35% in money terms (+13 p.p). The average sale price of smartphones bought on credit increased 22% y-o-y to RUB 18,500 due to larger share of such smartphones in total sales. Meanwhile, the average price of smartphones in general sold through the MTS retail network increased by just 8% to RUB 10,500.
The growth in sales of smartphones bought on credit was attributable to wide availability of credit facilities including better installment terms under the 0-0-24 and 0-0-36 schemes, the launch of online lending in MTS e-shop, cashback options as well as changes in consumer behavior. The subscribers’ approach towards the acquisition of a new smartphone became more pragmatic: the average lifetime of a device increased from 1.5 to 2 years, with customers preferring to buy more advanced smartphones with longer service life from well-known brands such as Samsung, Apple and Huawei.
Alexander Mosyakin, CEO of MTS Retail, commented: "We saw that today our customers are not just interested in purchasing a phone, but look for a universal device that assists them with everyday tasks: to buy tickets to the cinema, pay utility bills, watch a video, communicate on social networks etc. More and more people choose smartphones with a larger screen and a better camera. To meet this demand, we have enriched our traditional portfolio of available smartphones with more advanced and reliable models that also enable the full use our digital products such as the e-wallet, cloud services, TV, as well as a range of other apps in the MTS ecosystem. Meanwhile, we continue keeping our prices highly competitive and offer our clients favorable payment conditions and credit options. All this makes an acquisition of a new smartphone an attractive proposition for our customers”.
As the interest in advanced smartphones is growing, the share of feature phones sold in the MTS retail network is declining: 270,000 devices were sold in Q2 2017, a decrease of 60%. The share of C-branded devices with basic functionality that cannot compete with the leading devices is also in decline.
Samsung, Apple and Huawei are the three key vendors in the MTS retail network. Although Samsung have now devices returned to the shelves of other retail chains, their share in MTS outlets remains high and comprises 32.8% of units sold and 44.4% of revenue. Huawei showed the most impressive growth: its share of retail sales grew from 1% to 17%. Another leader in sales in MTS retail network was Apple: its devices priced over RUB 40,000 sold 2.5 times better in Q2 2017 than a year ago. Meanwhile, the share of Alcatel sales dropped 12.5% in unit terms and 7.5% in cash terms.
Russian smartphone market
Samsung remained the most popular cellphone brand in Q2 2017. The Korean manufacturer’s market share was approximately 26% in unit terms (+5 p.p.) accounting for 32.4% of total revenue (+5p.p.). This increase is attributable to the successful launch of the new Galaxy S8. The model’s success allowed Samsung to outsell Apple, its nearest revenue competitor, in the months of May and June. iPhone sales accounted for 32.1% (- 0.3 p.p.) of revenue and 12% (+1 p.p.) of units sold for the reporting period.
The third most popular brand in Russia was Huawei. The company's market share reached 8.4% in unit terms. The number of smartphones by other Chinese manufacturers - LENOVO and ZTE - sold in the Russian market decreased by 4 p.p. and 2.8 p.p. y-o-y respectively for the reporting period.
The share of smartphones in total handset sales grew to 74% in unit terms (+ 5.5 p.p.) and 96% in money terms. The average price of smartphones sold grew 6% y-o-y to RUB 12,900.
Overall, in Q2 2017, 6.2 mln smartphones were sold, an increase of 12% to the previous year. The sales of feature phones in Russia declined 16% to 2.2 mln units. The revenue from smartphone sales grew 16% to RUB 79.9 bln, while sales of feature phones decreased 20% to RUB 4.3 bln.