The cell market is long since saturated in the States, Britain and Oz. Heck, your average American hobo is on their third Android smart phone these days. (They have nothing to eat, sure, but - hey - they have a phone.) Android and iOS own these markets, but the so-called "developing" parts of the world are just getting hooked. Microsoft wants to be one of the two systems left standing and knows that Apple is currently not playing the low-end game. The result, they hope, is countries throughout Africa, South America and Asia getting addicted to inexpensive Windows Phone devices.
Since all of their R&D attention is spent on finding ways to mass produce phones as cheap as possible, that has left the high end market to the Nexus 6, Galaxy Note 4 and iPhone 6. Microsoft spent years trying to shoe-horn their product in that market and got nowhere, so this new direction makes a great deal of sense. Or, at least, has the virtue of never having been tried. Why fight the battle long lost when there is a market of customers out there that just wants a portable device with internet access?
Time will tell whether this game plan will turn these markets into long-term Windows Phone customers. Until then, Microsoft will keep hammering away at cheap devices and might even occasionally release a half-decent Lumia for the iPhone crowd, too. But don't hold your breath you highly developed customers. It is pretty low on their priority list right now.