Business News of 2013-02-13

Report: Fake phones cost genuine manufacturers millions

Fake phones are normally concealed alongside high quality mobile handsets imported into the country via the Kotoka International Airport and are costing genuine phone manufacturers millions.
This is what Kwame Annor, a dealer of low-cost phones in Adum, a suburb of Kumasi, the Ashanti Regional capital, revealed to our reporter.
Another dealer named David Adade, who operates from the Tip-Toe lane near Kwame Nkrumah Circle, an area noted for the sale of phones, also revealed that his products come through the Aflao border having been shipped from Dubai via Nigeria.
“We use the Elubo border to bring them [counterfeit phones] in,” Yaw Obeng a counterfeit phones dealer told this reporter. “Market Circle here in Takoradi is the central point for our goods,” he added.
This reporter also found evidence to the fact that some of these phones come into the country through the Tema and Takoradi sea ports.
This shows how widespread the phenomenon is and the negative impact it has had on the genuine phone manufacturers.
There is currently a telephone subscriber base of 24,884,195 customers up from a nominal figure of 132,000 in the year 2000.
The History of Mobile handsets in Ghana
The first cellular phone service in Ghana was initiated by Mobitel in 1992. In that year alone, 19,000 Ghanaians owned mobile phones. In 1998 the number of mobile phone users in the country increased to 43,000 and by the middle of 1999 the number increased to 68,000.
According to the National Communications Authority as at September 2012, since the first mobile telephony service provider was introduced about 20 years ago, the sector has seen a transformation with the incoming of five more mobile telephony service providers namely, MTN, Tigo, Vodafone, Airtel, Glo, and Expresso.
Statistics from the NCA show that currently, the five mobile telephony providers share a subscriber base of 24, 884, 195 customers up from a nominal figure of 132, 000 in the year 2000.
Counterfeit phones and the regulations
In the mid 2000’s when the use of mobile handset became widespread, the demand for cheap handsets also shot up.
Although some mobile handset manufacturers attempted addressing this demand with less sophisticated phones and low-cost products, one market that grew in notoriety was the dealers in counterfeit phones.
These counterfeit products promised sophisticated functions at a rather low price as compared to their original on the market.
In 2008, when the Communication Service Tax Act, 754 became effective, it meant that import duties were waived on mobile handsets with the tax shifting to consumers who use these handsets on their various telephony service providers.
This tax waiver is what has led to a boom in the importation of these counterfeit phones of popular brands such as Samsung, Nokia, HTC, iPhone, Sony Ericcson, Phillips among others.
As a result, phones bearing names such as “Samsung”, “Nokia”, “iPhone”, and “Sony Ericson” have found their way to the popular markets notably Accra, Kumasi and Takoradi.
The Ghana Standards Authority (GSA) which has the mandate to test and certify gadgets that come into the country particularly through the entry points says enforcing the standards is ‘a major challenge’.
According to the Communications Director of the GSA, Kofi Amponsah Bediako “although standards exist for mobile handsets, their enforcement is a major challenge.”
According to Mr. Bediako, most of the time when these gadgets find their way onto the market, it becomes very difficult to clamp down on them.
The Research and Communications Manager of the Ghana Chamber of Telecommunications, Derek Barnabas Laryea, however conceded that “not much attention has been given to this issue hence nothing much has been done about it.
“Although there are clear guidelines by the National Communication Authority on what is allowed and what is not,the phones come in all the same”
According to the Ghana Chamber of Telecoms, fake phones compete for and take part of the market share from genuine manufactures and retailers.
This discourages genuine manufacturers from investing in expanding retail shops and repair centers resulting in Foreign Direct Investment reduction, loss of employment, technology and knowledge.
The Chamber again argues that the genuine manufacturers are unable to recover the full return on their investment in innovation, their intellectual property right is infringed upon Brand names, trademarks and handset designs are protected by international copyright.
Manufacturers are also faced with brand image damage as some customers may perceive the fake and the bad experience as coming from the original manufacturer.
Mr. Laryea explains that a ‘reduced market share means reduced sales, reduced profit, reduced tax, reduced development’.
He argued that the substandard components such as the antenna, speaker, earpiece, battery makes these phones perform 30% - 40% lower than their genuine counterparts.
“Their low performance due to the poor quality is a drain on the network operators ‘resources causing network congestion for all subscribers -genuine and fake phone users.
“This reduces the use of the network service by subscribers and also affects the brand image of the network operator”, he added.
According to Mr. Laryea, frequent change of the phone or its parts-which are believed to contain substances such as lead and mercury- and their improper disposal normally lead to an “increase in environmental and health issues, increase health expense, increase waste and toxin disposal cost”.
There is high demand for mobile phones as communication has become a way of life.
The manufacturers and retailers of these fake phones are very much aware of the available market, the dynamic nature of the industry and the opportunities therein and will keep riding on the innovations of the genuine manufacturers to enrich themselves.
It is a lucrative business especially in Ghana for the manufacturers and retailers.
But the Telecoms Chamber believes pulling the plug on these phones is a secondary answer to this problem.
It emphasizes public education to create the awareness in the citizenry on the effect of these device on their health, the mobile services, the environment, the industry and the nation is the way to go.
The Chamber also called for a wide stakeholder consultation on solution to the problem.
Risk Sub-standard phones pose to consumers Ghana, like many other countries, subscribes to guidelines set by the International Commission for Non-Ionizing Radiation Protection (ICNIRP), which has been adopted by the World Health Organization and the International Telecommunications Union (ITU), of which Ghana was chair.
Ghanaian scientist, Joseph Amoako of the Radiation Protection Institute of the Ghana Atomic Energy Commission(GAEC), revealed that he led a study into the levels of radio frequency (RF) emissions from mobile phone handsets in the country indicated that several of the sophisticated-looking fake and cheap phones on the market emit levels of RF radiations far high than what is globally accepted as safe.
According to Amoako, who is also the Director of Regulations at the Radiation Protection Institute (RPI) of the GAEC, the ICNIRP guidelines for mobile handset stipulate that the Specific Absorption Rate (SAR) [the amount of energy given up by the phone in the human tissue] value or emission should not exceed 2.0 watt per kilogram (w/kg).
He stated beyond this threshold, the Radio Frequency Field from these gadgets can result in localized tissue heating, that is, a rise in temperature around where the phone is kept.
Dr. Amoako also stated that these phones with high emission particular poses threat to children whose brain tissue are forming because of the thermal effect the emission has on children.
He also warned that these phones equally have the potential of exploding.
This Investigations was supported by Programme For African Investigation Reporting (PAIR)