Weakening peso boosts adoption of low-end smartphones

The weakening of the Mexican peso against the US dollar has had a negative impact on smartphone sales in Mexico and boosted the adoption of low-end devices, according to think tank the Competitive Intelligence Unit (CIU).

The CIU estimated that there were 90.1mn smartphones in Mexico at the end of last year, accounting for 80.6% of the country's mobile lines.

Smartphones are classified into high-, mid-, and low-end devices according to their technological capabilities, which have a significant impact on retail prices. Low-end devices go for 2,500 pesos (US$122) or less, mid-end phones sell for 2,501-5,500 pesos, and high-end smartphones cost over 5,500 pesos.

Since smartphones sold in Mexico are manufactured abroad, prices are based on US dollars and then converted to local currency for retail.

Average spending on smartphones in Mexico was of 2,816 pesos at the end of last year, up 9.1% from a year earlier. This average shows a penchant for mid-end devices, according to the CIU.

In the last year, the Mexican peso has depreciated 25.1% against the US dollar, so when converting Mexico's smartphone inventories to US dollars, average spending on smartphones went from US$156 to US$136 in the period. Although there was a 9.1% increase in spending in Mexican pesos, the average spending dropped 12.8% when converted to US dollars.

The weakening of the Mexican peso has led consumers to opt for low-end smartphones despite the price reductions resulting from technological advances. Low-end devices accounted for 63.7% of Mexico's smartphones at the end of the fourth quarter, up from 56.2% 12 months earlier.

Conversely, the proportion of high-end smartphones dropped from 11.3% in 4Q15 to 7.2% at the end of last year.

The CIU noted that even though Mexican subscribers are paying less for mobile services, the depreciation of the Mexican peso against the US dollar has made acquisition of smartphones more expensive. Smartphone sales, particularly in the high-end segment, are being negatively affected, extending the time it takes users to replace their phones.