Phone maker Oppo has struck an exclusive deal with 2degrees for a NZ$2400 Lamborghini-branded Android phone. It is this seasons’ most expensive Android phone; at least in New Zealand.

The Find X Automobili Lamborghini Edition is a version of the company’s already-expensive-by-Android-standards NZ$1500 Oppo Find X. The extra $900 buys you a fancy Lamborghini case and bumps the phone’s storage from 256 GB to 512 GB.

A similar storage upgrade with other phone brands costs around $300 to $400. This means, in effect, Oppo and 2degrees want $500 for a luxury case and a little brand cache.

While it may not be official, you can buy external phone case covers with prestige brands printed on them for as little as $5 at places like Glenfield Night Market.

Sure, they’re not made of carbon fibre like the Find X Automobili Lamborghini Edition but come on, $500.

lamborghini-oppo-find-x
That’ll be an extra $900 thank you

Lamborghini exclusive

It is an exclusive deal. Only 2degrees get this model. It will only be on sale for a limited time. I suspect that the other carriers didn’t get into a bidding war for the rights to the Lamborghini Edition.

Oppo isn’t the first phone brand to try attaching its products to a flash car brand. Huawei did something like this with a Porsche branded model. It sank without a trace.

Going by that experience 2degrees and Oppo might struggle to get sales into double figures.

What makes this extra curious is that until now Oppo’s entire sales pitch has been about offering value for money. The company manages to pack about 90 percent of the functionality and features of, say, a top-of-the-line Samsung model into a phone that sells for roughly half the price.

You could say that Oppo is the phone brand for phone owners who aren’t too fussy about brand. That statement may be hard, but it’s fair.

Pricey Oppo

While we’re on this point, Oppo is pushing it asking $1500 for the Find X. Look for a review of that phone on this site in the next few days.

The Find X may have a unique pop-up camera to avoid notches or a large bezel, but that price is on a par with the best phones from better known brands like Huawei and Samsung.

Phone makers have worked to increase prices, in part because profit margins are slender. It’s one thing for an established name to bump prices by $100 or so, but this is getting on for double the price of earlier Oppo models.

After all, this is a brand who’s New Zealand phone sales are measured in hundreds, not tens of thousands.

Which brings us to the point of the wacky Find X Automobili Lamborghini Edition. It isn’t about selling a $2400 phone. Its main aim is to get attention for the Oppo brand. I guess this post proved that strategy worked.

Galaxy Note 9 sets new bar for Android phone price

This year a lot of people will pay NZ$2000 or more for a phone.

Apple set the tone at the end of last year with an NZ$2100 iPhone X. Now Samsung has joined the party with an NZ$2000 Galaxy Note 9.

You can pay less. A basic iPhone X with 64GB of storage costs NZ$1800. The more expensive model has 256GB.

Samsung has an NZ$1700 Galaxy Note 9 with 128GB of storage. The NZ$2000 model comes with 512GB.

Whether you need that much storage when cloud storage is plentiful and mobile data is cheaper is beside the point.

Inflationary

These are two examples of how New Zealand’s Consumer Price Index or CPI is the nearest thing to an official measure of inflation. In the most recent year, it was 1.5 percent.

That means consumers paid 1.5 percent more for a typical basket of goods and services in the year to June 2018 than a year earlier.

Expensive

At NZ$1700, the Samsung Galaxy Note 9 is $100 more than last year’s Note 8. That’s 6.25 percent higher: more than four times the CPI increase.

Apple’s iPhone X doesn’t have a year earlier model to compare.

Instead, we’ll look at the iPhone 7 and iPhone 8. When it launched the iPhone 7 was NZ$1200. A year later the iPhone 8 went on sale at $1250.

That’s a four percent increase. Apple’s markup is smaller than Samsung’s, but still well ahead of the CPI.

Everyone is at it

It’s not only Samsung and Apple. The prices of Huawei phone models climbed over the years.

Even Oppo, where the phone’s low price is the most important feature, has increased prices.

If anything, Huawei and Oppo’s price increases have been steeper than Samsung and Apple’s because they come off a lower base price.

But don’t phones get better

You might argue that the newer phones are better so phone makers can expect to sell them for more money. There’s something in this, see below.

Phone prices were stable during for years while annual upgrades meant huge leaps in functionality. Today’s upgrades are incremental while prices leap.

Apple shows the way

Apple has always lead the way on phone prices. It’s no accident it is the world’s biggest company and enjoys large profit margins. That trillion dollar valuation didn’t come by chance.

When it launched the iPhone X last year, Apple showed it could push phone prices above the NZ$2000 mark without denting sales. That opened the door for its rivals to charge more. They won’t admit it in public, but the iPhone acts as their benchmark.

Apple sells fewer phones than Samsung or Huawei.

The iPhone makes up around 20 percent of the handset market worldwide. It accounts for around 80 percent of profits from phone sales. Almost all the remaining profit from phone sales goes to Samsung.

Profits

It’s not clear how profitable the other main phone brands are. It’s not even clear if they are profitable. The companies don’t break out figures in the way that Apple and Samsung do. Yet it’s clear they are not making big margins.

Until a couple of years ago the Android phone market taken as a whole ran at a loss.

Things have changed. In part that’s because phone makers have pushed up handset prices ahead of inflation. It helps that some of the big names have either gone to the wall or wound down their operations.

Price rises have two sides

Inside the phone business, people talk about the average selling price or ASP.

According to IDC’s Worldwide Quarterly Mobile Phone Tracker:

…”climbing ASPs continue to dampen the growth of the overall market”

…”Consumers remain willing to pay more for premium offerings in numerous markets and they now expect their device to outlast and outperform previous generations of that device which cost considerably less a few years ago.

IDC says worldwide phone ASPs are up 10 percent in the last year.

Sharper prices lower down the market

Phone makers love to tell investors they have managed to increase the average selling price of their phones.

In some cases, they have done this by bumping up prices on their flagship models while fighting tooth and nail further down the market.

You can still get bargains. Spend NZ$500 to NZ$600 and you can end up with something great. It won’t have the latest camera or tonnes of storage, but not everyone needs those features.

High prices could be here to stay

New flagship phones are expensive to make, but the cost of building a phone is a fraction of the selling price.

Putting more lenses and more camera sensors may cost a phone maker a dozen or so dollars. OLED displays, curved glass add to costs. Perhaps the biggest extra cost is the memory chips needed to boost a phone’s storage, there is a trend towards higher storage in phones.

Higher phone prices are unlikely to go away soon. The glory days of fast-rise phone sales are over.

People are now holding on to phones for longer, squeezing more value from the money they have already spent. So it becomes important for each sold phone to contribute a little more profit.

Galaxy Note 9 is now Samsung’s most important phone. It matters because lacklustre Galaxy S9 sales mean falling revenues. A successful Note launch could help reverse that.Two days before the launch I wrote that the Galaxy Note 9 had better be good.How did Samsung do?The Galaxy Note 9 is impressive by any standard. It is, for now, the best Android phone money can buy.That’s the first problem: You need a lot of money to buy it.

Samsung faces intense competition

Rival Android phone makers challenge Samsung. The best deliver almost all the functionality of a Samsung phone for a fraction of the price.Sure the Note 9 takes buyers to places less expensive Androids won’t. Its stylus puts it into a different class to other phones. There is no direct equivalent at any price.That difference means the Note has notorious loyal fans. Many potential Note 9 buyers will be existing owners looking to upgrade.You only have to look at the Galaxy Note 9 to understand why that might be a hard sell.The new phone looks like last year’s Galaxy Note 8. Never mind its new innards. Over the years phone makers have trained buyers to be wowed by showy, cosmetic changes more than a new processor.

Is the Galaxy Note 9 good enough?

On Friday’s showing, the Note 9 may be good enough for Samsung to keep the phone market pole position until tenth-anniversary models arrive next year.If the S10 and Note 10 ranges can deliver signature phones in the same way Apple managed with the iPhone X, then all will be well.From what was on show in Auckland it still looks like a great phone. If the two models were a few hundred dollars cheaper they would be world beaters. If Samsung decides to sharpen its pencil and drop prices later, it could have a winner this Christmas.On the other hand, phone innovation has slowed to the point where customers are holding on to old models for longer. So all bets are off.It’s not clear to me what those notoriously loyal Note users will do. They may upgrade or they may sit this one out and wait for the 10.There’s little to tempt a Note 8 owner to upgrade. The Note 7 was the disastrous exploding phone so there will be few upgrades from that model. If there’s a large backlog of Note 6 owners waiting to move then Samsung could strike gold.

About the phone

Samsung uses glass for the front and back. There are smooth, comfortable feeling curved edges and pressing the bottom right of the phone still ejects the slide-out S Pen. This is all just like the Note 8.It’s fractionally bigger and a tad heavier than the Note 8. That’s to accommodate a slightly larger than last year’s 6.4-inch Amoled screen and a hefty 4,000 mAh battery. Samsung says that’s enough to keep even heavy phone users going all day.Galaxy Note 9 sets new bar for Android phone priceBigger seems to be a theme throughout. There are two versions of the phone: a NZ$1700 model with 128 GB of built-in storage and a NZ$2000 version with 512 GB.

Octo-Core

Samsung uses different processors to power the Galaxy Note 9 in different markets. It didn’t say which chip New Zealanders get but it will be an eight core processor.Phones with 512 GB of storage get 8 GB of Ram, the other phones get 6 GB. To my knowledge the Note 9 is the first phone to get water cooling to stop the processor from over heating.It will also be the first phone to get the Fortnite game. I suspect the target market for Fortnite is not going to drop a couple of grand on a handset.At the launch Samsung made a big deal of the improved S Pen stylus. After all it is what sets the Note aside from every other phone.The stylus now connects via Bluetooth and can be used as a remote to click the camera shutter or do one or two other remote tasks. The model I saw was a bright yellow that contrasted with the navy blue phone. This looks much better than it sounds.Samsung has gone for much the same camera arrangement as the Galaxy S9.  That’s two 12-megapixel cameras with a variable aperture lens and a 2x optical zoom camera on the back.Like everyone else’s camera, the Note 9’s is sprinkled with AI fairy dust so the camera automatically detects what’s being shot and adjusts to compensate.One nice touch is that the Note 9 can work as a desktop computer in much the same way as an S8 and Dex Pad. The difference is that the Note 9 can plug directly into a monitor without the docking station.

Verdict

Samsung says the phone will come with Android 8.1, not the more recent Android 9. It is due to go on sale later this month. In normal times this would give Samsung up to six weeks of sales before the next Apple iPhone appears.The slightly bigger screen is a plus. For me, squeezing 4,000 mAh of battery capacity into a hand-sized device is more of an achievement. The update S-pen will entrance Galaxy Note fans.More storage seems like a good thing. You can bump it up to a Terabyte if you use the microSD slot. Though why you would want to pay extra to do that in an era of low-cost cloud storage is beyond me unless you want to travel with a movie library.While it doesn’t look like a sure-fire hit, it is possible the Galaxy Note 9 will strike a chord with Note loyalists and give Samsung a much-needed 2018 winner. It could just as easily have S9-like disappointing sales. Your guess is as good as mine. But, so long as no rival makes a breakthrough, it is good enough to keep Samsung out in front until next year’s releases.

Christchurch skylineSpark says it is on track to begin rolling out a 5G mobile network in 2020.The company says services will go live later that year.This confirms the date the company has already said it would begin its next generation network build. It depends on the spectrum becoming available, then an auction or other form of allocation taking place in the next 18 months or so.The confirmation comes after the company conducted trials earlier this year. Spark says the Wellington outdoor trial was a success with customers getting download speeds of up to 9 Gbps. An indoor trial in Auckland saw speeds as high as 18.2 Gbps.While some telcos overseas are building new networks from scratch, Spark says it will start by adding 5G services to its existing 4G and 4.5G networks.Spark says it will extend this when there is enough demand.With existing cell sites there’s a smooth upgrade path. At least there is if a carrier sticks with the same equipment supplier.Spark managing director Simon Moutter says the company is working on mapping expected cell site densities to learn where there is a need for new cell sites.He says: “We have already begun a build program to increase the number of cell sites in our existing mobile network – which will enable us to meet near-term capacity demand as well as lay the groundwork for network densification required for 5G.”

No extra CapEx

The company says it is expects to fund its network through its existing capital expenditure programme. This does not include buying any extra spectrum needed for 5G.Spark spends around 11 to 12 percent of its revenue on capital expenditure. Spark’s 5G briefing paper says:
As Spark responds to demand we will be investing just ahead of it. Cost efficiency that will deliver ever-greater output with the same investment inputs is the primary driver of early 5G deployment.By 2020, we expect our wireless-network specific capex to be between 25-35 percent of Spark’s overall capex envelope. This implies intended annual wireless network investment of approximately $100m to $140m, compared with an average of just over $100m for the past five years.This excludes spectrum purchases and any material move towards widespread rollout of new cell sites using mmWave band spectrum. During this period, we expect our total capex (excluding spectrum) will remain in line with our desired range of 11 to 12 percent of revenues.
This is something of a surprise.5G network equipment tends to be less expensive than 4G hardware. But to deliver the next generation network’s full promise, a carrier needs more spectrum and at higher frequencies it will need more small towers.Many of these towers will be smaller than existing 4G towers – in some cases they can fit on lamp posts or telegraph poles, but even so, Spark’s comment about capital expenditure suggests one of two possibilities.

It won’t happen overnight

The first possibility is that Spark’s network roll out will be incremental and relatively slow. This follows the pattern of the company’s roll-out of 4.5G.It is two years since Spark first installed a 4.5G tower in the centre of Christchurch. There are more today, but coverage is far from nationwide.It looks likely the 5G roll out will begin before Spark has upgraded every worthwhile cell site to 4.5G. Presumably many sites will go straight from 4G to 5G.The second possibility is that Spark isn’t aiming for the same high density network being planned for large urban centres elsewhere in the world. At least not at first.Neither of these are important in the short-term.Indeed, today’s mobile phone users can’t tell the difference between using a 4.5G tower and a 4G tower. There’s no pressing need to upgrade the network on their behalf.And places like Eden Park in a test match aside, New Zealand doesn’t have the density of people you might find in Hong Kong or New York.Spark may want to push forward on plans to offer 5G-driven fixed wireless broadband as an alternative to fibre. It already does this with 4G. This is a strategic business decision. If there’s enough demand for more fixed wireless then the internal business case for increased capital expenditure is easy to make.

5G innovation lab

Spark plans to open a 5G Innovation Lab later this year in Auckland’s Wynyard Quarter. This will let companies test their applications on a private 5G network before the full roll-out.The company says:
“Providing early access to a pre-commercial 5G network through our global relationships with leading equipment vendors like Huawei, Cisco and Nokia will give our local partners a competitive boost, fast-tracking these businesses’ 5G developments.”
Significantly Spark has not named the network equipment provider it will work with on the programme.The company used Huawei to build the 4G network and has previously worked on 4.5G and its test site  with the Chinese equipment maker. Huawei has to be in consideration for the contract despite the political problems the company faces getting business in the US and Australia.Yet Spark deliberately named Nokia and, surprisingly, Cisco. The latter is not known as a technology provider for cellular networks. This could be a way of putting pressure on Huawei in order to get a better deal.Spectrum is a potential concern.In a briefing paper Spark called on the government to make more spectrum available. All the carriers are pushing hard. They have a case.This is already in motion, but the company wants this done in time for the new network to be running ready for the 2021 America’s Cup in Auckland. Hence the earlier comment about the need to get this wrapped up in the next 18 months or so.Spark says it needs large blocks off spectrum in the C-Band, that’s 3400 to 4200 MHz. It says it needs at least 80 MHz blocks and preferably 100 MHz blocks to build networks with 5G performance. It also calls for even larger blocks at higher frequencies.

On Friday Samsung New Zealand will take the wraps off its new Galaxy Note 9 phone. The main event is on Thursday in the US.

By comparison the Auckland affair will be low key.

Almost every time Samsung or Apple holds a major phone launch people say ominous words to the effect that: “there’s a lot riding on this”.

That’s because there often is.

Galaxy S9 disappointment

Samsung’s Galaxy S9 phone, which launched earlier in the year, was beautiful. But it failed to sell in anticipated numbers. So far it has sold 20 percent less than the S8 managed a year earlier.

This means the company needs the Galaxy Note 9 to succeed. In this case success means it has to sell in numbers close to last year’s Galaxy Note 8.

Two flops in a row would be a disaster.

We’ve been here before.

Last year there was a lot riding on the Galaxy Note 8. That’s because one year earlier the Galaxy Note 7 flopped because of its unfortunate habit of exploding. You couldn’t get an aeroplane without someone reminding you of the danger.

Recovery

Coming back from a public relations nightmare of that magnitude was a feat. Phone buyers were forgiving. At the time it was clear that Samsung had used up a lot of good will.

Another exploding phone would destroy the company’s hope of being a high-end player.

Which brings us to the Galaxy Note 9. To sell it has to offer a more compelling value proposition than phone’s from Samsung’s rivals.

This means two things. It needs to offer buyers considerably more phone than the Galaxy Note 8. A better camera isn’t going to cut it.

Storage

The market rumour is that Samsung will offer more storage than in any other phone. It’s not clear that this will be enough to get people to upgrade.

Maybe that’s what the market wants. More likely, it will be what a market segment wants.

Samsung’s threat is not Apple. There’s little traffic between Android and iOS phone users.

The real problem is rival Android phone makers. In New Zealand this means Huawei, Oppo and Nokia. There are other rival brands overseas

Rivals ready to pounce

Each of the companies mentioned has phones that are arguably either the equal of Samsung’s models or close enough that it makes little difference. But their models sell for hundreds of dollars less than Samsung’s.

Which tells us exactly what could give Samsung the 2018 hit phone it so badly needs: drop prices.

The Samsung brand carries enough weight to justify $100 or more than a Huawei. It’s hard to justify spending hundreds just to get a me-too phone with a posher brand name.

Oppo phones are almost as good and half the price. Nokia has better software.

Galaxy Note 9 has to be more than great

The Samsung Galaxy Note 9 has to be great. More important, it has to have a tempting price tag.

There are reports of revolutionary Samsung phones in the pipeline.

One model is foldable. Next year’s tenth anniversary Galaxy S10 is rumoured to have a fingerprint reader built into the display. Apparently some people are excited about that.

The Galaxy Note 9 has to be more than a place holder en route to those models. If it is another flop, the brand will lose its lustre and Huawei’s foldable phone and innovative finger reader will relieve well-heeled Android phones of their savings.