FEATURE PHONES: The Smart Breed

It

seems that Indian feature phone brands and makers are gradually

finding their place under the sun. Not long ago feature phones

were a prerogative of the grey market operators. Thanks to the

opening up of the economy and the consequent telecom revolution

sweeping the country, a host of indigenous and multinational

brands have now taken over from the grey market. What has been

instrumental in propelling the demand for such phones is their

capability to perform more than one function, their use in both

the home and the business segments, technological advances, the

growing variety of brands, and fall in prices. Interestingly,

utility value apart, some dominant players have also been making

an effort to market these phones as lifestyle products.

In terms of technology and

specifications, feature phones are a far cry from basic phones.

Prices of such phones are usually based on the number and type

of features they have. At the lower end, these phones may have

features like memory, speaker, and hands-free dialing in

addition to the usual functions like flash, redial, pause and

mute found usually in all basic phones. Such phones cost

anything between Rs 600 to 1,500. As the price goes up, so does

the number of functions. Features like voicemail, answering

machine, number and date display, call transfer and conference

facility and many more facilities, depending on one’s needs,

can be bought in a single phone. Though a feature phone with an

in-built Caller Line Identification (CLI) is yet to come in the

Indian market, many phones do come with a CLI device attached to

them. Phones with such features usually come at a price starting

at Rs 3,500. Phones with more advanced features like two-line

with three-way conference may cost somewhere around Rs 4,500 and

Rs 5,000. Cordless feature phones, too, usually come in the same

price bracket. Besides, there are ISDN compatible digital

feature phones with much more advanced features and a higher

price tag. These phones also allow one to make two simultaneous

calls from a single line.

Though no exact figures

are available on the market size, industry players estimate that

the feature phones market in India is worth around Rs 50-55

crore, accounting for some two lakh sets sold annually with 70

percent being sold in the lower price band. Of course, this also

includes feature phones sold through the grey market channels,

vastly dominated by Japanese brands like National Panasonic and

Sony, which still hold sway among a small section of consumers.

Major players in the Indian feature phone market include

Tatafone, a division of Tata Telecom Ltd, Siemens Telecom, which

has a tie-up with Bharti, and BPL. Of these, Tatafone claims to

roughly hold a 45-50 percent market share, while the share of

Siemens and BPL is somewhere around 20-25 percent each. Other

players like National Panasonic, Sony, Punwire, and Orpat claim

the rest of the market. Besides, Ascom and Wanland market ISDN

feature phones. Orpat, a relatively new player in the feature

phones market, possibly makes the cheapest equipment.

Interestingly, the most

sought after brand of the grey market days, National Panasonic,

started its feature phones operations in India in the end of

last year. It will take some time before it becomes a

significant player. It is another matter that the brand is still

doing roaring business in the grey market shops.

Market

Segmentation

According

to Sanjay Diwan, general manager (sales and marketing), Tatafone,

broadly three sections of consumers are driving growth in the

market. Taking Tatafone’s market as a benchmark, he points out

that EPABX manufacturers, offices and institutions, and the

up-market retail consumers are the three important sections of

buyers. Of these, he adds, the office segment, including the

SOHO market, account for 70 percent of all feature phones sold.

However, feature phone companies are finding a lucrative market

in the retail consumer segment also. "We are trying to

develop a need for a second phone among our target customers and

trying to sell them feature phones as a lifestyle product,"

says Diwan. Siemens Telecom’s Amanpreet Dhingra and National

Panasonic’s Rajneesh Rawat too find a promising market in the

home segment. "In the long run, the consumer market is

going to be more lucrative," says Rawat. He, however, adds

that for the present it is the institutional buyers who are

going to dominate the market. Like Diwan, Dhingra too

says that as feature phones perform many more functions than

their basic versions, many consumers consider them lifestyle

products.

Another significant trend

is that companies are finding markets beyond metros and other

big cities. Homes in the rural areas in the developed regions of

the country are a good market, says Diwan. Rawat too finds

upcountry towns lucrative. National Panasonic plans to use its

sales network for KTS for marketing these phones in small cities

and towns.

However, for players like

Orpat, which offers feature phones at a price ranging from Rs

550 to 990, market categorization is of less significance.

"We are selling these phones at the price of a basic phone,

so most of our buyers are retail customers who would have

otherwise bought a basic phone but for the price factor,"

says Yuvraj Khatpal, managing director of Delhi Watch Company, a

distributor of Orpat feature phones. He asserts that Orpat would

become the largest low-cost feature phone manufacturer by the

end of this year. His assertion is basically based on what he

calls the growing need in the homes in metros and the A-class

cities for a second or third phone. "We aim at a minimum

profit so that we can generate volumes in the market," he

adds.

ISDN Drives

the Growth

With

the penetration of Internet and growth of ISDN network,

especially in the metros and cities like Bangalore, Hyderabad

and Ahemedabad, ISDN compatible digital feature phones have been

finding good buyers both in the business and home segments.

Ascom India Pvt Ltd, the current market leader which has four

ISDN feature phone models under its belt in India, has set a

sales target of 30,000—40,000 ISDN phones for next year.

"Half of these would go to individual customers," says

Navin Rana, Ascom. He adds that once ISDN network expands in the

India, the market for ISDN phones would grow rapidly. He says

that Ascom, which makes bulk sales of ISDN feature phones to DoT

and MTNL, is optimistic on this count because of the fact that

DoT has started working on developing ISDN networks in 26 cities

and towns. "Once this happens we are sure to increase our

market penetration," Rana adds. Moreover, DoT’s decision

to wave the basic charges for an ISDN connection is also likely

to boost sales in this category.

Though less significant,

Phillips and Telenet are other players in this field. These

digital feature phones, however, have higher price line. One can

make two simultaneous calls from such phones and they have such

features as facilities data storage and digital recording.

Prices have come down in

the ISDN phone category. Even a year back, it was not possible

to own an ISDN feature phone at less than Rs 13,000. Now, it is

possible to own one for just



Rs 6,000 with all the features that its high-priced version
offered a year back. Ascom, whose base model of ISDN feature

phone costs just Rs 6,000, recently brought down the price of

its top-end Eurit 40 model from Rs 30,500 to Rs 25,000.

"As in other parts of

the world, in India too, these phones are now much more

cost-effective and incorporate more features and better

technology," says Rawat of National Panasonic. Growing

competition has forced players to reduce prices drastically and

incorporate new features in the recent past, he says adding that

his own company is planning to introduce a feature phone with an

in-built CLI within three months. Diwan, too, emphasizes that

companies are increasingly focusing on innovation and design. As

such, Tatafone now has 15 models in the feature phones category

with various specifications and design.

Made in India

Many

Indian players are making efforts to sell Indian made feature

phones in the global market place. Diwan says that Tatafone

feature phone brands are now well accepted in countries of

Africa, Middle East, and the SAARC. He, however, adds that

Indian feature phones still have a long way to go when compared

with products from Japan and China. While Japanese phones are

undoubted considered the best in the global market, products

from China are more difficult to compete with as they are

available at dirt cheap prices which no one can beat. They even

beat the low-cost Orpat phones. "We have been targeting

countries in SouthEast Asia and the Gulf, where we face tough

competition from the Chinese products," Kathpal points out.

Where’s the

Grey Market?

Amid

all this what are the Grey market operators doing? Have

shopkeepers in markets like Palika Bazaar and Gaffar Market in

Delhi, Crawford Market in Mumbai or the Burma Bazaar in Chennai

shut their shops? Definitely not. However, feature phones

sellers, for instance in the capital’s Gaffar Market, are

doing business without the big profits of the yesteryears. A set

on which they used to earn over 100 percent profit some years

ago now sells at less than 25 percent premium. "Customers

come to us because we offer after sales support and services–something

which a Grey market operator does not,’’ says Rawat. He adds

that companies like National Panasonic have also succeeded in

educating consumers about the disadvantages involved in buying

from a grey market.

With time, these phones are

likely to become more and more multifunctional. For consumers,

it would mean that they would have access to features and

facilities, which were previously unavailable in a phone or were

too expensive. As for the market, with the major players

optimistic about both the business and the home segments, it is

going to move in only one direction–upwards.