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Israeli Carriers Avoid Buying New Devices From Samsung

August 30, 2015 - Written By David Steele

Carriers occupy a precarious position between device manufacturers and fickle customers. They act as the go-between, handling the calls, text messages and data for customer devices, occupying in a competitive market where every business concerned wishes to capture the customer mindshare and generate customer loyalty. Carriers need to organize a long list of services from managing and upgrading the network through to complex billing systems with roaming partners, whilst providing a return for shareholders. Relationships with device manufacturers are generally healthy, but there are rumors that some of the larger manufacturers are difficult, which means Apple and Samsung. Today’s story concerns how the Israeli carriers are avoiding buying handsets direct through Samsung but are instead seeking alternative routes to acquire handsets. The three carriers, CellCom Israel, Partner Communications and Pelephone Communications, are the three official Samsung device importers via Samsung Israel but after a dispute that is reputed to have lasted for several months, these three businesses are not currently buying the Note 5 device direct from Samsung, but are instead sourcing the new smartphones from other sources. Customers can still buy Samsung devices sourced at Samsung Israel via open market stores such as Bug, Dynamica and Hot Mobile, as unofficial importers are still bringing products into the country.

The details as to the dispute are sketchy. The source website cites one of its unnamed sources, where the story here is that there is a crisis of faith between the three carriers and Samsung Israel. The carriers claim promises from Samsung Israel have not been kept and do not trust the official device importer. The Israeli carriers are relatively small in a global context but Samsung appear to be applying the same rules to their sales incentives and similar as they do to all other carriers, including the large heavyweights of the US market. The example given is the fixed payout for selling Samsung devices; the original sales target was set at $12 million, which the smaller carriers could reach. However, Samsung have moved this sales target up to $20 million and these three carriers are unable to reach this. Thus, the carriers do not benefit so much from selling the device. Worse, Samsung have been increasing the price of their devices at the same time when these three carriers are struggling to encourage customers to upgrade to the new models – one way to encourage this is to reduce handset or contract prices, but this of course, hurts the carrier’s profits.

Because the three carriers are being squeezed from the Samsung end of the arrangement at the same time as at the customer side, they decided not to partake in the new launch of the Samsung Galaxy Note 5: there were no executives at the launch of the new Galaxy Note 5 and Galaxy S6 Edge+ devices. Instead, the three carriers are waiting for prices to drop: it appears that they will be selling the Galaxy Note 5 bought direct from Samsung, but not until the devices are cheaper. We have no timescale when this will be but it is possible that we will need to wait until the new iPhone is released. Meanwhile, the carriers are looking to “parallel import” devices from other (presumably larger) carriers around the world and pass these savings on to customers. Buying the devices from a source other than Samsung Israel will likely require the carriers installing Hebrew language support themselves rather than having Samsung set up the device for them and could have warranty implications going forwards. We have recently seen Samsung falling out with other carriers and resellers around the world; it appears that part of Samsung’s recovery plan is to play that much harder with carriers and it will be interesting to see how things pan out over the coming months.