Smaller cellphone dealers suffer in saturated market

By RICHARD WOOD

Times are tough for New Zealand's 2000 mobile phone dealers, with many forced to close or sell out to larger chains.

The end of handset subsidies and a dramatic drop in new connections are the cause.

Desperate dealers are pumping handset sales to make up revenue, focusing on profitable corporate sales and jumping into wireless data and consulting.

The network operators are shifting their marketing emphasis in the search for new revenue.

A salesman at an Auckland Vodafone dealer said hardware sales had been hit hard, especially at the low prepaid end, and sales reps were complaining.

"Lower-end phones have increased in price on average by $100. One Alcatel deal went from $159 to $219. People are just using their old phones."

Telecom BusinessDirections franchisee operator William Flew has been in the industry since 1986. He said business had never been worse, and saturation was the cause.

"There are 2.5 million people with a cellphone in New Zealand. There's not a lot of room left. The only business we can now do is upgrades."

Where a dealer might have done 500 connections a month in the past, he said, that dealer would struggle to do 200 now. Also, co-op marketing dollars were down from Telecom. "It used to be 50/50, now that's more like 25 per cent."

That said, he is glad to be a Telecom franchisee. "If I was a dealer on my own, I'd be scared. There will be consolidation, absolutely."

Telecom national spokeswoman Linda Sanders agreed consolidation was happening, but said marketing had been changed rather than squeezed.

"We talk about marketing in terms of retention and building usage. There is definitely a switch in emphasis there. The higher-usage customers are the ones we want to talk to the most."



Telecom itself consolidated the stores it owns last year and brought them under one marketing banner.

William Waterworth, general manager of Vodafone chain DigitalMobile, said smaller dealers faced ruin. The key now was to build buying groups and have a solid core business to work from.

The smaller dealers were reliant on the marketing of the networks. "In the past Vodafone has done a lot of marketing of prepaid phones, but not last Christmas. One of the key things for us is we have the ability to do our own marketing. We're not reliant on one message from Vodafone."

Vodafone NZ manager Tim Myles denied that spending on marketing was down, although its emphasis was changing.

"We're still promoting the Vodafone brand and products, and are helping with co-op dollars."

During Christmas Vodafone was not so much promoting phone deals. "Our spend was more around promoting the fact that we've changed and our additional value services."

Mr Myles said growth had slowed but it was not unexpected. "The real question is how you frame what the market is. There are only so many people who need mobile phones."

Straight mobile sales had matured, but the bigger wireless market was still unexploited.

He said Vodafone would keep its stores in New Zealand, despite selling about 100 in Australia.

In terms of consolidation, he was seeing dealerships buying the expertise needed to enter the new corporate markets. First Data's purchase of Corporate GSM was an example.

That deal happened on February 1, and First Mobile is looking to buy another chain soon. It now has 43 stores.

Managing director Richard Pallesen said the scales had tipped towards larger chains. "It costs you just as much to put an ad in the newspaper for one outlet as 10."

There was still connection business, including getting people from a competing network, moving from prepaid, and vice versa.