The whys and wherefores of the $20,000 iPhone

(A guest post from reader/journalist Arnaldo Espinoza)

The Whys and Wherefores of the $20,000 iPhone

Arnaldo R. Espinoza (@Naldoxx)

Prices in Venezuela stopped making sense a while ago, and nowhere more so than at the Apple Store.

Long gone are the days of Dame tu PIN and the bidding wars between carriers. It’s become pricey (very pricey) to get a new phone.

The explanation has two tiers. The zanahoria one is demographic. Venezuela was a market in expansion up until the 3Q of 2012, when the market reached full saturation with one mobile line for every man, woman and child in the country.

At that point, name of the game became replacing phones – stolen phones, in most cases – and promoting other services. An example? In that 2012 Christmas season, Digitel announced it would roll out 4G/LTE technology to gain some ground on the “Movi’s” (Movistar and Movilnet).

But the deeper driver is what you’d expect: dollar madness. Up until 2009, companies were allowed to import directly their cellphone stocks. Then, a dry spell. A regulatory change cut off phone importers from cut-rate CADIVI dollars, forcing them to jump to el permuta to keep up with market demands. A year later, regulation knocked at the door again. Telecom Venezuela (formerly CVG Telecom) was commissioned to import all the devices needed “to stop rampant speculation”. The State centralized the supply. You know how that movie ends.

After a honeymoon year-and-a-half, the first signs of trouble emerged. At the end of 2012, the Grey market (cellphones purchased a dólar negro) started gaining ground. Prices spiked. Telecom’s yearly results showed that they could only import 20,2% of the orders placed by cellphones and VoIP (voice over IP) companies (1.213.538 units out of 6.036.879). The explanation? The usual: there were no dollars.

2013 was worse. With Venezuelans demanding over 10 million new cellphones (most of them stolen as stated in late 2011 by our favorite diputado, Ricardo Sánchez), Telecom only bought 2,7 million.

And, by the time the Comandante underwent his siembra, all hell broke loose. If you can find a phone, it was probably purchased at the black market rate.

In 2008, when I was a junior journalist at Unión Radio, I saved all my aguinaldos to buy an iPhone 3G. My first Apple gadget was 2.880 BsF – a meal for two in today’s Fuerte economy. If I do the same today, I can only pay for less than half of the iPhone 6.

With virtually no Cadivi dollars, the Grey market accounted for almost 70% of cellphones sales in 2014. The other 30%? Telecom purchases plus Vetelca (a.k.a., Vergatario!) plus manufacturers’ purchases. Samsung and Huawei started to bring their devices directly (with Sicad I dollars, of course, and without Telecom getting involved, of course) and gaining market share.

That’s why a Galaxy S5 is almost one hundred thousand Bs. cheaper than an iPhone 6 in Venezuela, even thou both of them sell for $650 in the US.

By the way, how is that tablet and cellphone factory going? Have they found a location for it yet?

Back in November 2014, when the first iPhone 6 arrived in Caracas, they were selling at 26,000 Cadivi-rate dollars each (distortion, anyone?). That’s 34 iPhones at retail price in the US. For that kind of money, at the same mall where I saw it, I could have bought a 13-inch MacBook Air and a 32-inch LCD TV and still have 3.000 bolos in my pocket (for lunch, and stuff). Nowadays, it sells for 267,000 bolívares or 22,000 Sicad III? dollars. A Black Friday criollo!! Run!! (Ok, no).

In 2014 we saw the first Bs.100K and the first Bs.250K cellphones. In 2015, we will see the first 300K device in Venezuela. It will be the next-generation iPhone. Eight years ago, my girlfriend bought her first car for 20,000 bolívares.