Ultra low-cost handsets (ULCH)—those selling for $35 or less—will determine the success of operators and vendors in emerging markets, according to “ULCH—A Key to Success for Vendors and Operators in Emerging Markets,” a report from the Strategy Analytics Emerging Markets Communications Strategies service. More than half of the 300 million ULCH expected to be sold in 2013 will go to emerging markets, with China and India playing a crucial role in driving the growth.

Between 2007 and 2013, the ULCH share of global handset sales will triple, as operators try to attract new users. “Emerging markets have a huge untapped population,” says Rahul Gupta, Manager, Emerging Markets, and author of the report. “But it’s a population with limited spending power. A low-cost handset has to be part of the strategy of any operator or handset vendor trying to get a piece of this market.”

“The most important issue for operators seeking to benefit from low-cost handset development is to choose suppliers who have global scale in purchasing, product design and brand,” added Chris Ambrosio, Executive Director of the Strategy Analytics Global Wireless Practice.

This report also points out that low-cost alone is not sufficient; the need to provide a limited set of rich applications, such as embedded gaming and FM radio, along with the expansion of distribution and service networks into rural areas, compounds the challenges that operators and device vendors have in developing ULCH offerings.