March 11, 2014

#Venezuela: #BlackBerry's Caribbean Oasis Turns to Quicksand

Let's just hope they made more money than what they'll have to write off...

Venezuela: BlackBerry's Caribbean Oasis Turns to Quicksand

Venezuela: BlackBerry's Caribbean Oasis Turns to Quicksand
Mobile Communications
Posted by Ligimat Pérez on March 05 2014It is easy to forget now amid its economic and political convulsions but for many years Venezuela was BlackBerry’s South American jewel, an unexpected success story in a country better known for chasing away foreign businesses.

With a cellphone penetration larger than its 29 million habitants, most of them chatty by nature and eager to show off the best technology they could afford, Venezuela was paradise for smartphone makers despite government economic controls. BlackBerry landed first and Venezuelans fell in love with it.

That success mattered even more from 2012 after key markets like the US and Mexico started to turn their backs on the Canadian phone, and Venezuelans rushed into the stores to buy more. So, sales jumped 72% according to the state telecom agency Conatel. The socialist realm of Hugo Chavez became BlackBerry’s regional bastion, more important even than Brazil. BlackBerries accompanied Venezuelans to the beach, the office, even to bed. “PIN me,” became the fashionable phrase among a large legion of users. Even Chavez showed off his BlackBerry on his TV show.

But now this Caribbean oasis is turning into quicksand for the once-groundbreaking company. Its market share is starting to crumble, which is bad enough, even worse, the company’s revenues are trapped in the socialist republic.

While reporting bleak fiscal first quarter results in 2013, the phone company blamed much of its loss on Venezuela’s currency control, which forced it to write off $72 million in profit, shaving 6% off their revenue in the region.

The issue appeared again in a press release about its preliminary quarter 2014, where the corporation warned that its performance may differ from the forward-looking statements due to many factors including “…risks related to recent political and economic developments in Venezuela and the impact of foreign currency restrictions that continue to impact its ability to recognize revenue from sales of services in Venezuela.”

BlackBerry is not alone. Asdrubal Oliveros, director of the Ecoanalitica consulting firm in Caracas, told Bloomberg that foreign companies held an estimated $12 billion in dividends in Venezuela that they were struggling to repatriate before rampant inflation and an expected devaluation devastated its value. At least for the airlines, it is too late now. This old debt is most likely to be paid at 11 bolivars to the dollar, than at the official rate of 6.3 bolivars.

From Spanish Telefónica reporting difficulties in repatriating $3.3 billion in profits, to airlines that stopped selling tickets to and from Venezuela because of trapped $2.6 billion in ticket sales, most transnational companies are facing the same problem. Compounding their plight, the government is obliging them to invest more in the country, as a condition of the repatriation of some funds.

In spite of these circumstances, BlackBerry’s Senior Product Carrier Manager, Leonardo González, told IDG Connect that “Venezuela is still a very important market for BlackBerry” and the company “continues to work hard with the local carriers to provide the Venezuelan market with BlackBerry smartphones and services, amidst the problems we [are] n rt≠£‘ eall aware of.”

Venezuela´s government first established an exchange control in 2003 to try to prevent capital flight. Ever since, purchases of dollars have to be approved by the central government at a fixed price. Until recently, companies would repatriate funds though a parallel foreign-exchange market known as the permuta, which involved trading government bonds at brokerage houses, but the government closed them and jailed some of the owners for participation in “illegal activities.”

Although in effect trapped in the Caribbean country, BlackBerry also has good reason to stay: a market that Euromonitor, a market research provider, estimated was worth $12.5 billion in 2013, and that for years has favored the Berry over other smartphones. “We still have an important presence in Venezuela,” said González, who explained that Venezuelans preferred BlackBerry because of the unique PIN, its popular BBM instant messaging system and its security features.

Security has been a special plus to corporations, politicians, and celebrities in a country where private conversations are intercepted and made public by pro-government TV shows and newscasts. Even state owned enterprises such us the oil company PDVSA, with in theory little reason to fear spying, have relied on the Canadian company for secure communications.

On the streets, BBM has recently become a key tool for activists coordinating ongoing national protests against the government.

While all these qualities are still appealing to talkative Venezuelans, the Ontario-based company lost 583,332 of its 5 million users last year, which may be the beginning of a long decline of its once bulletproof Venezuelan loyalty.

With purchasing power chilled by 56% snowballing inflation, Venezuelans are flirting with cheaper options, such as the state subsidized V8200, an Android version of the Vergatario. The cell phone, launched in 2009 by late President Chavez, was a hit among the poor but it made headlines mainly for its name derived from the Spanish verga, the colloquial word for penis.

Priced at $30 the V8200 is Android-powered, has a 4-inch touch-screen, camera in the front and back, and 1G of memory; a bargain for those who cannot afford to replace their old BlackBerriesBlackBerries with new models or whose phones have been stolen, lost, or fallen into a toilet.

Rampant insecurity has also had an effect on the market. Many have restrained their natural impulse of showing off their handsets in public for fear of being robbed and have gone for modest handsets that no thief would want. An additional challenge for BlackBerry, but perhaps an opportunity for local retailers to sell off dusty stocks from another, once dominant phone company: Nokia.

Ligimat Pérez is a bilingual freelance journalist based in Los Angeles, following a career in journalism in Latin America for CNN, Venevision and the United Nations

IDG Connect – Venezuela: BlackBerry's Caribbean Oasis Turns to Quicksand


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