Mobile industry unveils first 'ultra low-cost' phone

Motorola launches $40 phone targeting developing countries

Motorola has launched an 'ultra low-cost' mobile phone targeted at potential users in the developing world.

The handset is the first product of an initiative by the global trade body for mobile network operators, the GSM Association (GSMA), to help attract 100 million new users in coming months.

Motorola is the first of the 18 GSMA member operators involved in the project to start mass-production, and aims to sell more than six million of the $40 (£21) second-generation (2/2.5G) phones in the next six months.

The mobile industry hopes that low-cost phones will encourage more subscriptions in developing regions, where prohibitively high hardware costs are blamed for low adoption rates of 20 per cent, particularly in areas where up to 80 per cent network coverage is available.

'It is important to recognise the importance of essential components, like handsets, to bring our services to as many subscribers as possible,' Rob Conway, GSMA chief executive told delegates at the 3GSM World Congress in Cannes.

Operators in some of the developing regions are also taking part in the initiative, including India's Bharti, the Philippines' Globe Telecom and AIS in Thailand.

Ben Wood, Gartner mobile terminal analyst, says the launch is going to take the industry to a new level of pricing, as some manufacturers may fold under additional pricing pressures.

'If this becomes the benchmark, some manufacturers will find themselves going out of business,' Wood told Computing.

'And although Motorola has secured the first business in terms of the ultra low-cost handset initiative, I think Nokia is extremely well positioned to take advantage because of the volume of its business.'

Wood says the cheap phones may also help boost the 2G and 2.5G replacement handset market in more mature regions with 3G networks.

The GSMA also plans to bring out a sub-$30 (£16) handset, and launch a greater variety of handsets from other manufacturers.