Vertu reality

A maker of $200,000 smartphones

In a recent book review in the British magazine The Spectator, Stephen Bayley observed that “the BMW-sponsored London Olympics were held on a site devastated by Luftwaffe planes powered by BMW’s engines”.

If that seems ironic, others might also consider it an irony that a company from Communist China has just taken control of Vertu, a smartphone firm that very explicitly caters to the needs of the world’s top 0.01% (as opposed to the proletariat).

Of course, readers of WiC with a greater familiarity with modern China won’t find it particularly surprising at all, but they still might be puzzled as to why a little-known Chinese entity is interested in this niche phonemaker, formerly owned by Nokia.

According to Nanfang Daily, an investment agency named Godin Holding has purchased Vertu for an undisclosed sum. Vertu had previously been acquired by the Swedish private equity group EQT for €200 million ($212 million) in 2012.

Godin Holdings was incorporated in Hong Kong in July and seems to be a shell company for Beijing-based Godin Cyberspace Security Technology (tech news provider Engadget found the connection in the Hong Kong Companies Registry).

So what exactly is Godin buying? Unusually among tech companies, Vertu is based in the Hampshire idyll of Church Crookham in the UK, and employs 450 people there (as well as about the same number elsewhere in the world). The phones are handmade by individual craftsmen and are marketed as objects of beauty as much as communication devices. Prices range from an entry level $10,000 to a more plutocratic $200,000 and come with scratch- proof sapphire glass, titanium cases and exotic leathers (ostrich in the case of the Aster model). For the pricier handsets gold and diamonds feature, while the ringtones are produced exclusively by the London Symphony Orchestra.

An additional benefit: the phones come with an in-built app that offers concierge services promising access to the most exclusive restaurants and tickets for sellout theatre performances, such as Benedict Cumberbatch’s Hamlet.

But as one former Vertu customer told WiC, the main draw is less the concierge service and more what ownership of the phone implies (elite status). No doubt this is the kind of message that Vertu’s new owner from China would like to amplify. According to Communication Information News, Vertu already has 60 ‘boutiques’ in China, concentrated mainly in first-tier cities. But it has struggled to deliver local language services, which has restricted its word-of-mouth reach among Chinese high-end users.

The new owner will need to correct this if it is to succeed with Vertu’s new strategy to expand its retail network into more second and third-tier cities, Communication Information News suggests.

Forbes magazine says that another of Godin’s priorities may be to promote a new ‘secure’ operating system that it released in June. The domestically-engineered GOS platform uses advanced encryption and can wipe data if a phone is reported lost or stolen. It looks likely that this software will supplant the Android-based OS that Vertu phones have run on for the past two years.

Godin is obviously betting that a Made in England phone with a hyper-secure Made in China operating system might persuade more of China’s super-wealthy to join the Vertu club.

And in other smartphone news Xiaomi released a new model, the Redmi Note 3, this week. At $140 the model clearly isn’t going to compete with Vertu but it will lock horns with homegrown brands like the Huawei P8 (which – thanks to its dual SIM card and innovative features – got a rave review from Jonathan Margolis in the Financial Times). Data from Canalys suggested that Huawei had overtaken Xiaomi to lead the local smartphone market in the third quarter (see WiC304), with Huawei’s unit sales growing 80% year-on-year. Vertu’s new owner will be hoping for a similar percentage increase…

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