Out of the shadows

Channel players will need no introduction to long-time handset manufacturer High Tech Computer (HTC).

With almost a decade of experience in supplying handsets to major industry vendors such as i-mate, O2 and Virgin Mobile, the company’s decision to operate as a vendor under its own brand name has sent shockwaves through the Middle East’s handset channel.

The company chose GITEX Dubai 2006, to unveil its initial product rollout in the region where it claimed it had “driven the Windows Mobile segment” in the Middle East since it began shipping units in 1997 as a third-party manufacturer.

Speaking to ECN at the event the company also claimed that its technology featured in more than 80% of Windows Mobile handsets.

Having commenced shipments to the European markets under the HTC moniker in 2006 the company’s own-branded products were officially made available to Middle East consumers in February 2007. Kevin Chen, general manager of HTC in the MEA and CIS, claims the switch from supplier to vendor will prove a relatively painless procedure given the company’s previous market experience.

“Our previous operations as an ODM entity have allowed us to build up a wealth of expertise in designing and manufacturing handsets.

“However, in recent years there were many discussions within the organisation itself; the main focus of this debate was how to bring the company forward,” claims Chen.

“Eventually, we came to the consensus that HTC should take more responsibility in how our products are delivered and presented to end-users. This decision was taken as we were confident of the company’s ability to successfully leverage our reputation for manufacturing high-quality premium handsets to garner a strong reputation among end-users.

The company’s decision to enter into direct competition with its former industry bedmates prompted the demise of its relationship with handset vendor O2.

However, HTC claims that it continues to maintain its relations with certain companies in the channel but remains tight-lipped as to the extent of these dealings. The company is adamant that its new circumstances will not result in any conflicts of interest.

“We are currently in partnership with some network operators in the European markets. We have chosen to maintain our ODM agreements with network operators, such as Orange and T-Mobile, as it has been a close relationship that we have developed over many years,” claims Chen.

“We are still providing i-mate with a very limited quantity of goods, the exact nature of the agreement is bound by contractual confidentiality so I’m not at liberty to disclose any more than that,” he adds.

“However, our primary focus will be to operate under the HTC brand. At present our main objective is to enhance the brand-equity of HTC among consumers in the market; channel players will know who we are and exactly what they will get when they do business with us.”

Chen also highlights that HTC’s philosophy of supplying the market with innovative product designs is central to its ploy to win favour with the region’s end-users.

“As a manufacturer HTC built its reputation by consistently supplying the market with innovative products.

This is a strategy that we intend to continue under the HTC brand by including high end features, such as push-email and messenger, on our products,” says Chen.

“We anticipate that the HTC S620 will prove popular with consumers in the Middle East as it facilitates push-email and provides Wi-Fi connectivity, which are increasingly popular features in this market segment,” he speculates.

“In terms of our product portfolio, we want to ensure that every one of our products is unique, unlike some other brands whose portfolios contain little or no variation in terms of product applications.”

HTC asserts that strong consumer demand for smartphone handsets in the Middle East was a significant factor in the company deciding to start trading under its own brand.

“As an ODM dealer, we have witnessed increased demand for PDA and smartphone products in the region in recent years. To a certain extent, this has motivated our decision to operate under our own brand,” says Chen.

This stands in contrast to the European markets where it had previously operated under the Qtex brand until 2006. The company also claims demand for its products in its native Far Eastern markets have proven so strong that it will continue marketing itself under the Dopod brand.

“HTC’s main message to the Middle East market is that it was actually HTC who manufactured many of the smartphones already sold in this region,” states Chen.

HTC claims to have worked closely with its channel partners to successfully address the needs of Middle East consumers in preparation for the company’s regional launch.

“When dealing with supposedly ‘emerging’ markets, it is extremely important to work in tandem with operators in order to customise our products to the network capabilities available,” claims Chen.

“This ensures that our customers experience minimal compatibility issues with our products. This is necessary to gain credibility in the upper echelons of the Middle East market,” he adds.

“Consumers in this region are becoming increasingly sophisticated and demanding after-sales service, as opposed to the box-pushing model as was previously the norm.”

He also outlines plans to successfully head-off the challenges the Middle East market will pose. “We are developing Arabic applications that will be included with all of our handsets,” says Chen, who also stipulates the importance of localised strategies in the Middle East channel.

“Even though our Dubai offices are not fully operational at present, they will eventually be offering sales and retail training to our channel partners in the region. We will also provide support to our end users through our call centres, as well as via our company website which will also be available in Arabic later this month.

“We have yet to finalise the details of the exact location of our regional base, in terms of when it will be fully operational, but I can tell you that we are planning to man it with a 25-strong team initially. They will be responsible for sales and marketing activities,” says Chen. “The Dubai office will also provide localised support in terms of after-sales and technical assistance for both our channel partners and end-users,” Chen explains.

Highlighting the diversity of the Middle East markets, he also points out that the region is one of the company’s key target areas in the global market.

“The ‘localised’ support is a key aspect to our strategy in the Middle East as we want to prove to end-users that we are fully committed to the region. Our teams will offer Arabic and English-language support to our customers.

“Our Dubai team will also liaise with our customer-support offices in Europe to resolve any initial problems we might encounter,” he adds.

“Launching in the Middle East will be the major focus of our global strategy in 2007. This will be reflected in the amount of money and manpower we invest in our regional operations. We see the combined purchasing power and rapidly developing infrastructure of this region as having massive potential for companies such as ourselves.”

HTC also claims that the emergence of new technology will make 2007 an exciting year for high-end handset vendors eager to capitalise on the Middle East’s developing network capabilities.

“We intend to approach the entire region using a country-specific distribution model, as we are fully aware of the disparities of each market. Normally when people refer to the ‘focus’ markets of the Middle East they mean Kuwait, Saudi Arabia as well as the UAE,” says Chen.

“However, we also have high hopes for the Egyptian, Iranian and Turkish markets particularly as the emergence of third-generation (3G) networks in these countries is likely to provide a boon for HTC sales.”

Chen also reports that the entry of a second network operator, Du, will bolster a market that many consider to have reached saturation.

“This has been an important factor in our preparations for launching the HTC brand in the Middle East. The UAE represents on the region’s major markets in the smartphone segment and we are in ongoing negotiations with Du to provide services on our handsets that will be unique to that particular network,” he explains. “I am confident that this will provide a major boost to our sales predictions in the market.”

With a strong reputation among the region’s channel players, HTC admits it must rely heavily on its channel partners to increase end-user recognition in the Middle East.

“Given HTC’s history and considerable expertise as a handset manufacturer we will have to ensure that our marketing and branding activities meet these high standards,” claims Chen. “Admittedly, this is something that HTC is not as well-versed in but we are confident that the quality of our products will speak for themselves and raise the profile of our brand in this region.”

However, HTC is confident its distribution strategy will successfully tap into the key market segments necessary to increase their profile.

“The Middle East is a retail-driven market and we understand that vendors underestimate this section of the market at their peril but we are satisfied that our channel partners can achieve this,” adds Chen.

“So far they have been successful in placing our products in a number of premium outlets including power retailers Jacky’s Electronics and Plug-Ins Electronix. Our regional launch and marketing activities started last month with advertising across a variety of media and we have received a favorable response so far.”

The company is targeting the booming UAE tourist trade with in-store placements in the world-renowned Dubai Duty Free. HTC’s distribution partners have also expressed that they are not interested in garnering market share through the region’s hypermarket outlets.

The company also reveals that it has no intention of entering the region’s blossoming entry-level handset market.

“We are definitely positioning ourselves as a premium brand and will be targeting the mid-to-high end segment of the market in this region. We feel that consumers are willing to pay a premium price for our unique products,” states Chen. “At present we have no intention of engaging in a price war in the lower tiers of the market.”

Chen also stipulates that this policy makes HTC a popular option for their channel partners as it enables them to offer enhanced margins to distributors.

“Our operations in the other global markets suggest that end-users are prepared to pay for the quality goods and services that buying a HTC product will offer, thus all of our channel partners will benefit,” he says.

Chen also claims HTC is in the process of rapidly expanding its regional distribution network beyond its current partnerships with Dangaard Telecom and Link Retail.

“We are seeking future channel relationships with distrib-utors, particularly those with experience of servicing the market with premium brands,” adds Chen. With HTC already trumpeting its laurels to Middle East channel players, the big question is just how confident is the company that it can use its technical expertise and channel know-how to make the transition from the industry’s best kept secret to major industry player?

“Our ambition is to take a leading position in the Windows Mobile device market in the Middle East during 2007,” declares Chen. “Our goal is to be number one in the market.”

The fact that many of the industry’s major players have sourced their products for almost a decade is testament to its pedigree.

However, HTC’s key challenge lies in its ability to effectively convert its reputation among the region’s industry players into name recognition among consumers.