Indian Handset Market-Survival of the Fittest

After the telecom services players drafted their role in the Indian telecom success story, it is the turn of the handset players to add few leafs to it. Couple of years back, handset biggies like Nokia, Samsung, LG, Sony Ericsson, and Motorola were all over the retail outlets but the last 2 years saw the emergence of home-grown handset makers and a consumer now has a choice of more than 200 mobile brands to choose from. What surprises most is that though the market is ridiculously crowded with a number of handsets, every handset manufacturer is too confident of their survival in the world's fastest growing telecom market. The Indian mobile handset market has grown by 30.17% from 116 mn handsets for the 12-month period ended December 31, 2008 to 151 mn handsets for the 12-month period ended December 31, 2009, says a report by Analysys Mason. The report further forecasts that the market is expected to grow from a total of 151 mn handsets for the 12-month period ended December 31, 2009 to 402 mn handsets for the 12-month period ended December 31, 2014.

This gives the home-grown handset vendors like Micromax, Lava, Karbonn, Intex, etc the much required confidence to stick to the market and put their money in. “The market in India is huge and so there is room for more than one Indian brand to carve out a small share from the ever- increasing size of the pie,” says Shailendra Jha, DGM, telecom of Intex Technologies. He further adds that the growth in the Indian mobile handset market is also likely to be driven by the replacement handset market rather than new user additions. “There is a huge replacement market in India and above all, the consumers are now very receptive towards newer brands,” he adds. The replacement market is expected to grow from 118 mn handsets for the 12-month period ended December 31, 2010, constituting 62.77% of overall Indian mobile handset market, to 359 mn handsets for the 12-month period ended December 31, 2014 constituting 89.30% of the overall Indian mobile handset market.

Pricing is the Key

The report by Analysys Mason reveals an interesting fact. It says that the growth of the Indian handset market has been driven by the growth in 'medium' ASP devices (devices with a price in the range of 2,000 to 5,000). The contribution of medium ASP (average selling price) devices has increased from 34.48% for the 12-month period ended December 31, 2008 to 45.03% for the 12-month period ended December 31, 2009. This segment is likely to be the fastest growing with volumes increasing from 68 mn handsets in 2009 to 240 mn handsets by 2014. The report also says that the segment is expected to grow at a CAGR of 26.07% in the next 4 years.

Going by the report and looking at the Indian handset vendor's strategy, it can easily be said that the handset companies are bang on target. Most of the new players are mainly focusing on rural areas and sticking to low cost devices. The prices for most handset models by these new companies range from `1,000 to `5,000. Micromax though offers a range of utilities and latest features in its mobile phones, and has kept it price point very affordable for the customer. Most of its models fall in the range of `2,000 to `5,000 and customers are showing more interest towards Micromax phones compared to the MNC vendors as they are getting more value for their money with their local vendor. Wynncomm Mobiles which has sold more than 6 lakh units so far has kept the price of all its phones between `1,000 to `4,000. Local vendors like Airfone and Olive have kept the price range between `1,000 to `4,500 for their feature phones, which constitute 95% of their inventory.

Rural is the Goldmine

As the urban handset is at the verge of saturation, most Indian handset vendors are focusing on rural India to be successful. Many of these new handset companies feel that people in rural areas do not go by brand as they don't even know these brands. Rather they go for products that fulfill their requirement in their budget. “We strongly believe that Indian consumers do not have any marked preference for foreign brands be it in mobile phones, consumer durables, or FMCG products,” says Shilendra Jha of Intex. SAR Group company, Wynncomm has its eyes fixed on rural areas of UP, AP, MP, and Maharashtra. “Slowly we are moving out to other states but our current focus in on these states,” says Kapoor of Wynncomm. Zen Mobile has the same feeling about the customer behaviour in rural areas but somewhat little refined. “The consumer in a sub-urban or a tier-2 town is looking for handsets that give him instant recognition amongst the peers through innovative features along with the best value for money,” says Deepesh Gupta, managing director, Zen Mobile. He says that the rural market which is still largely untapped, demands for products that offer basic functionality along with some eye-catching features at competitive pricing.

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Click on the image to enlarge

Airfone which claims to sell more than 2 lakh units per month is mainly focusing on 2 states at present-Gujarat and Rajasthan, though they are present in other states as well.

“30% of our revenue comes from these 2 states,” says Vishal Chitkara, director marketing, Airfone. Roshan Kumar of Longtel says that though the Indian market is believed to be nearing saturation, in reality it is still open and there is a potential for growth of another 75%.

Reaching your Customer

The success of any electronic product depends on the easy availability and prompt after-sales service. Though the new handset vendors do not have deep pockets like Nokia, Samsung, etc to set up robust and company owned retail network, they have devised their own plans to tackle the issue. Most of the vendors have gone through the unorganized retail route to make their presence felt in various markets, and to reach out to customers. “It is not the deep pockets that give you success, but quality of products and services would be the game changer,” Shailendra Nath N Rai, co-founder & director, Lava Mobiles explains. “3Ps-Price, performance and post-sales is our USP and this can make or break a brand,” he further adds. The company does not have a distributor or national distributor kind of set up but is present in 25,000 retail outlets. The company which launched its first phone model in the middle of 2009 has launched 23 models so far and has sold 6 lakh units in this short period. Lava has a 700+ strong after sales centers and claims that 85% of consumer complaints are resolved in four hours. Wynncomm is also present in its target market through its 7,500 retail stores, mostly unorganized outlets.

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Though the vendors are doing everything, from reaching the remotest part of the country, hiring celebrities like Amitabh Bachhan, Mahendra Singh Dhoni, Virendra Sehwag, and Bipasha Basu to promote their brand-to offering new features like 30 to 70-day long battery life, multi SIM phones carrying 2, 3 and at times 4-SIMs, not many feel these vendors can ever be national level brands. “The whole game lies in the percentage which we are targeting. We are not targeting big numbers immediately,” says Jha of Intex. Deepesh Gupta of Zen Mobiles feels that the Indian handset market will eventually consolidate to an extent as it will be a story of survival of the fittest. There will be some big players emerging and others will only be able to continue in smaller pockets of the country. This is because this industry requires constant investment into strengthening the product, R&D right to the market strategy. “Most players would not be able to sustain the level of response time and the speed and flexibility demanded by the mobile industry,” says Gupta.

Gyana Ranjan Swain
gyanas@cybermedia.co.in