Indian Tiger Roars

The Chinese nightmare continues to haunt the big international handset
manufacturers in the country. With an increasing number of new brands being
launched in this segment, Chinese handsets have effectively found another way to
eat into the marketshare of the branded handset manufacturers in the country.

Check this out: Telemart, the official distributor of Samsung mobile division
has launched two brands-Zen and Xcite. Big C is planning to launch a brand of
its own, just like UTL, Univercell and Sangeetha Mobile.

The year gone by saw the entry of various distributors and smaller players
directly entering the handset market by launching their own branded handsets
that have the potential of emerging as strong regional players in the handset
market.

“The regional players generally enjoy the trust and confidence of the local
people, and will not have any problem in pushing their own brands. And if the
same features are available for half the price, why will the consumer not lap it
up” says an industry source. This is the main lure behind the increasing
popularity of the Chinese handsets in the Indian market.

End consumers, even in metros, feel that the branded handsets are over priced
and do not offer value for money. This is especially true for the youth segment
in the metros that wants to boast of the latest features and gizmos. “If they
purchase a branded handset, it becomes redundant within six months since the
company would have launched a new version of the same handset. It is here that
Chinese handsets score since they are cheap, consumer can purchase new ones even
if they become redundant,” says an industry source.

War for Upcountry Market

Most of the new brands, which are being launched are in the tier-2 and
tier-3 cities and are in the price range of Rs 2,000 to Rs 7,000, and claim to
offer the latest and hi-end features. It also goes without saying that most of
them would be sourced from China.

“People are looking for value-for-money products and this is where brands
like us can make an impact. Moreover, regional players enjoy tremendous trust,
so it won't be difficult to make inroads in this market,” says D Sathish Babu of
Univercell. Hyderabad-based Univercell is one of the country's largest mobile
retailer and has an array of stores in Tamil Nadu, Karnataka, Andhra Pradesh,
Kerala and Pondicherry.

The trend is especially significant in the current economic slowdown where
the end consumer is looking for value-for-money products instead of splurging on
brands. Multinational brand will clearly be a second player in the Indian market
this year.

Apart from that there is clearly a scope for new players in the Indian
handset market. India is the second largest market for mobile subscribers after
China. From the estimated one billion mobile phone consumers globally, India is
expected to contribute 250 mn. The market size for GSM and CDMA mobile phones in
India is 110 to 110 mn in 2008 and is likely to grow to 150 mn by 2010, with 50%
coming from the replacement market. Around 75% of the Indian handset market is
dominated by the big branded handset manufacturers like Nokia, Sony Ericsson,
Samsung and others. This is likely to change with the entry of numerous small
players who have the advantage of being trusted by the population of the region
since most of them are present in some form or the other in the region.

“The mobile phone segment catered to by the Indian brands of mobile phones is
growing significantly and we estimate this segment of phones to be selling more
than a million units in a month and growing every month,” says Sudhir Hasija,
managing director, United Telelinks.

The fact that so many local players are launching new handsets brands
reflects an inherent weakness in the business model of the big and multinational
handset players like Nokia, Samsung and Sony Ericsson. There are clearly gaps in
addressing the market in the tier-2 and tier-3 cities.

Most of the handsets launched by the small regional players are in the price
range of Rs 2,000 to Rs 5,000 and are obviously targeted towards low-income
groups. Since they are being launched by the distributors, who have a strong
presence in that region, it is relatively easy for them to convince the end user
to purchase them. Another reason for the plethora of brands being launched in
the market is that the national consumer is now ready to accept Indian brands.

“Smaller brands are creating waves in the upcountry market mainly because the
Indian consumer is ready to accept the Indian brand. there is also a clear trend
towards, `value-for-money' proposition. Tier 2 and tier 3 cities are not very
brand conscious and the distributors have strong presence in the local market
and it is easy for them to push these brands,” says Subhash Chandra of Sangeetha
Mobiles.

Bangalore-based Sangeetha Mobile is the distributor of MicroMax, one of the
most successful Indian brand in the handset segment. The company has more than
ten brands in the market and is planning to launch two more soon. Micromax is
also planning to go in for expansion.

The other reason is that the retailers are not able to make much money on
branded handsets. “There are a number of overhead costs in modern trade and it
results in more opex cost. In the back end the margins are very limited and it
is not a viable option. And the margins are good in the case of lesser-known
brands,” adds Chandra.

Industry sources believe that this market will continue to boom and will
continue to eat into the marketshare of the big branded handsets. Collectively,
these brands have the potential to rake in a considerable marketshare, thus
putting the handset major on a back foot.

“The current boom in the `Indian Brand' mobile phones is a logical
progression in the evolution of the Indian telecon consumer. There is a growing
demand for mobile phones with all the bells and whistles, but at an affordable
price. The smart Indian consumer will not compromise on product quality or after
sales service. Brands which ensure these hygiene factors would tend to do well
in the current scenario,” says Hasija of UTL, which launched Karbonn in pilot
markets in January this year.

The main reason why consumers go for a branded product is to ensure the after
sales service. This issue is effectively sorted out when a distributor himself
is offering the product. For instance, Karbonn has tied up with two after sales
service provider and will be having its own company owned and franchised service
centers. The same is true for Hyderabad-based Univercell, which has also tied up
with after-sales service provider.

However, it is not going to be all rosy for the Indian brands. It is easy to
launch a brand but difficult to sustain it over a longer period of time. “The
main challenge is to sustain it for a long time. It is not difficult to launch
but we need to push the brand and motivate our sales team. We are targeting 10%
of our sales in the first quarter to come from our own brand,” says Satish Babu
of Univercell.

Rural is going to be the focus of all the handset brands, so this segment of
the market is going to see a lot of action with both the handset majors and
small Indian brands fighting for their share of the pie.

Gagandeep Kaur

gagandeepk@cybermedia.co.in