Sony Ericsson sees higher prices in emerging mkts

By Lucas van Grinsven, European Technology Correspondent

PARIS (Reuters) - Sony Ericsson (6758.T: Quote, Profile, Research, Stock Buzz)(ERICb.ST: Quote, Profile, Research, Stock Buzz) said consumers in emerging markets are starting to replace their first, cheap phones, creating an opportunity for more expensive models from the world's fourth-largest cellphone maker.

"What we are seeing is definitely that in so-called emerging markets...there are replacement cycles already happening fairly quickly," Sony Ericsson head Miles Flint said at the Reuters Global Technology, Media and Telecoms Summit in Paris on Wednesday.

"People in emerging markets don't just want cheap phones, they want good phones," he added.

Flint said the Sony Ericsson does not compete much in the ultra low-end of the market of $20 to $30 handsets, a segment dominated by Finnish rival Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz).

"We have been consistently saying that we are not intending to go to the ultra low parts of the market where I think one vendor has a very strong cost position," Flint said.

Annual handset sales in developing markets have grown three fold since 2002, compared to 62 percent growth in developed countries, according to Strategy Analytics.

Some 65 percent of all handsets made this year will be sold in emerging markets.

Asked if Sony Ericsson, the fastest growing of the top five handset makers, was benefiting extra from troubles at Motorola (MOT.N: Quote, Profile, Research, Stock Buzz), he said: "I think it's a little bit early to tell."

Motorola entered the ultra-low end of the market, but millions of its phones were not sold, crowding operators' shelves at the start of 2007. The company posted a loss for January-March as it tried to cling to market share.

"Our second quarter volumes are pretty much where we expected them to be at the moment. The second quarter is running in line with our own estimates," Flint said.

To boost its presence in the lower end of the one billion units a year global cellphone market, Sony Ericsson has clinched a deal with French rival Sagem to develop entry-level models.

Last year, Sony Ericsson also developed three phone models in China, where it has a large factory, and it will start producing cheaper handsets in India.

"China is ceasing to be just a low cost location. It's an attractive location in terms of value creation not just cost avoidance. Many of the Chinese we employ are rightly sensitive about being seen as just low cost," Flint said.

The imminent launch of Apple's (AAPL.O: Quote, Profile, Research, Stock Buzz) iPhone will be at the high end of the market, in Sony Ericsson's profitable sweetspot of music phones which carry the Walkman brand, but Flint is not too concerned.

"Our devices are phones first, and I hope you never see a single device from us that isn't first and foremost a really good phone," he said.  Continued...