TORONTO – Research In Motion Ltd.’s pricing power with carriers shows signs of slipping after the BlackBerry maker was forced to cut subscriber service fees as demand for its smartphones in emerging markets slows.
CEO Thorsten Heins, who will introduce the BlackBerry 10 operating system next month, told analysts on a Dec. 20 conference call that RIM faces pressure to reduce fees to stay relevant in our markets. The Waterloo, Ontario-based company dropped the most in more than four years on Dec. 21 in Toronto.
Before the arrival of Apple’s iPhone, carriers were willing to absorb the monthly subscriber fee to tap into BlackBerry’s sales momentum and its data compression technology that ate up relatively little bandwidth.
Both those advantages are disappearing with iPhones outselling BlackBerrys and RIM’s new devices set to use much more data, said Avi Silver, a Credit Agricole Securities analyst.
RIM’s high-margin services revenue stream is slated to come under significant pressure as operators push back on sharing data revenue, said Silver, who is in New York.
The pushback from carriers comes as new data suggests BlackBerry demand is slowing in markets such as India. Emerging markets have helped RIM shore up sales as consumers elsewhere wait for BlackBerry 10 phones due to go on sale in February, or flock to the iPhone 5.
Sales in the United States, Britain and Canada dropped by 53 percent last quarter from a year earlier to $949 million, according to a Dec. 21 company filing. Revenue from the rest of the world including markets like Nigeria and Indonesia, where BlackBerry is the top-ranked smartphone, fell 44 percent to $1.78 billion. RIM doesn’t provide further breakdowns of country or regional sales.
RIM is set to finish 2012 with a 4.7 percent share of the global market, compared with almost 90 percent for Apple and Google ’s Android software combined, according to research firm IDC.
Subscribers who want enhanced services, including advanced security, will continue to pay a fee, while others who don’t use such services are expected to generate less or no service revenue, Heins said on the conference call. RIM said it will give details on the new fees when BlackBerry 10 services are introduced.