Mobile Phone: Freewheeling Growth

The telecom sector continued its unabated growth. The FY 2010-11 saw India bought more than 120 mn handsets at an average of 10 mn per month and mobile subscriber additions at an average of 18 mn for the same period. The Indian handset market grew by 15% to reach `33,171 crore in FY 2010-11 compared to `28,897 in FY2009-10. No doubt, this data is envy for all and lucrative enough for more and more players to jump into this business, sometimes adding 'mobile phones' to their core business units. Incidents are not rare where we saw some companies ditching their existing businesses completely to plunge into this ever-increasing business space. This aspect of business opportunity saw India flooded with numerous mobile brands, and a customer now has more than 200 brand options to choose from.

With the kind of telecom explosion being witnessed here, the Indian handset market is no more the preserve of the big 5-Nokia, Samusng, LG, Motorola, and Sony Ericsson. In the last couple of years, more specifically in the last financial year, much smaller companies, both in terms of scale and economy, have shaken the hitherto leadership positions enjoyed by the biggies. And they have not only threatened their leadership, but also taken some pie of their market share and that too quite comfortably.

The Movers and Shakers

Continuing its leadership position, Nokia remained on top with `12,929 crore revenue, showing a negligible growth of 0.2%. The company posted revenue of `12,900 in the previous fiscal. For Nokia, the largest mobile phone maker, FY 2010-11 remained an eventful year. The Espoo based firm witnessed a tough time not only in India but also globally and it witnessed a loss of market share both in smartphone and non-smartphone segments, significantly. Globally it reported its market share to plunge to 29% for first quarter of 2011, down from 33% for the same period of 2010. On the operating system front, it is facing fierce competition from its competitors like Google and Apple. Google's android has of late become the de-facto choice for smartphone OS while Nokia has vehemently denied of having any future association with Google for the open platform OS. The Finnish company had entered into a partnership with Microsoft in February this year for using its Windows based OS for future smartphones and other devices. It certainly shows Nokia's desperation to regain its lost glory.

The Finnish firm was followed by Samsung at `5,720 crore for FY 2010-11 from `4,700 in FY 2009-10 registering a growth of 22%. Samsung is the only company amongst the Hi-5 to grow at faster pace than its competitors like Nokia, LG, Motorola, and Sony Ericsson. While the entry-level phone market of Nokia is eaten up by small and new entrants in the market, Samsung has so far became successful in eating Nokia's high-end customers. In the FY 2010-11, the company launched 42 handset models in various categories. Samsung's entry level smartphone 'Wave' and 'Galaxy S' have been hugely successful during this period. The Korean company has been growing in leaps and bounds for the last couple of years because of some strategic business decisions taken by the firm. The firm has a huge range of products in its portfolio and more importantly on all popular operating systems-Windows, android, and bada. The Samsung smartphone range available across the android, bada and Windows platforms is priced in the range between `8,800 to `32,890. In the 3G space, the company has done pretty well during the period. For FY2010-11, the company's 3G phones contribute 5% of the entire sales. Moreover, the company is not just focusing on devices but also making these devices more of 'mobile internet devices'. Its touchscreen and high-end camera phones saw a huge traction during the last fiscal.

Micromax, arguably the most successful Indian handset company captured the third position with the revenue of `2,289 crore. It grew by 43% from the previous fiscal when it registered revenue of `1,602 crore. Its success can be attributed to its strong distribution network and 'good-looking' phones at an affordable price. Certain credit can also be given to its brand promotional activities. It spent more money than any other mobile phone company in India on brand building. The company also filed a DRHP with market regulator SEBI to raise `426 crore.

Research in Motion, the makers of the BlackBerry phones, for the first time came in the top 5 in the Indian handset market space. The firm's sales figure touched `1,950 crore during FY2010-11 from `1,210 crore in the previous fiscal, showing a growth of 61%. The year saw many changing trends in the Indian consumers, and acquiring BlackBerry is one among them. The Canadian company had brought down the prices of few of its models, the lowest being available below `10,000. Hitherto perceived as a device for elites and enterprise executives, the affordability of the BlackBerry made many buyers skip the usual choices to go for the smart device. The entry-level BlackBerry saw maximum traction during this period. Interestingly, the company sold more entry-level models alone in the fourth quarter than the other 3 quarters put together.

Another Korean Company-LG, posted a revenue of `1,834 crore for FY2010-11 compared to `1,600 crore showing a growth of 15%. However, the company is loosing market share consistently. The company does not have a clear segmentation for its mobile devices business, and the unit has been clubbed along with its IT business. Though LG launched only a few handsets in the smartphone category in the year 2010, but it has made a strong move ahead with the launch of the Optimus range. The company launched around 20 handsets during the period. Some of the launches like Cookie Pep, Cookie Fresh, and Cookie Plus reiterated our commitment to the Indian youth, and established our expertise in innovation and keeping consumers abreast with new technology in the form of a handset. In the fag-end of the fiscal year, the company launched the world's first dual core processor phone, Optimus 2X.

The unusual entry to the V&D100 club is Chinese handset maker G'Five. However it was not unexpected as the Chinese manufacturers are the largest exporter of handsets from its manufacturing plant in China to many countries and mostly to the emerging markets like India and Africa. With `1,326 crore the company acquired #6 position putting up a growth of more than 75% from `755 crore in FY2009-10.

Among the Indian comapnies, Karbonn, Maxx and Spice Mobiles have done pretty well, posting revenues of `1,004, `745, and `920, respectively. Other vendors like Lava, Intex, Zen, etc, have shown almost a flat growth.

Taiwanese handset maker HTC, is slowly but consistently making strides into the Indian handset market, especially in the smartphone segment. Showing a 100% growth, the company registered revenue of `450 crore for FY2010-11 from `226 crore a year before. The company seems to be very focused and wants to be a smartphone specialist, globally as well as in India.

Future No Less Exciting

The next fiscal would be no less exciting than the last fiscal looking at what lies in the store. To start with, the Nokia Microsoft partnership would be a very interesting affair to watch out in the next fiscal as the companies have promised to bring out their much awaited WP7 phone in the last quarter of FY2011-12. The marriage between the 2 giants in their own field has drawn mixed response from industry watchers and analysts. The software giant has so far failed to push its Windows mobile operating system and the world's largest mobile phone maker is struggling hard to retain its leadership position in its core business area. Both the companies are hopeful of turning around their position from this association. On the domestic front, a lot of Indian handset companies are planning to set up their manufacturing plant here. If that happens, and we see products rolling out from those factories, cost of devices is expected to fall.

Firms like Maxx sees a good potential in setting up its own manufacturing plant in India, as it has been manufacturing mobile phone batteries, chargers, and accessories for the past few years. The company feels that it perfectly makes sense to set up a manufacturing plant now and they are working on it. Most probably, they would set up the base by the end of this fiscal.

Karbonn Mobiles, which has become a strong contender in the local handset arena in the recent times is far ahead of its peers in terms of having its own manufacturing plant. The company is expected to complete setting up the plant machineries by July 2011 and would start rolling out its own products by August. The firm earmarked an investment of `100 crore for the plant and would be producing around 6 lakh mobile phones every month.

Micromax, perhaps the biggest and arguably the most successful among the new handset players, have also shown interest in setting up their own manufacturing lant. The company which has filed DRHP in SEBI for going public has earmarked an investment of `226 crore from the IPO proceedings for its manufacturing plans. Though they have not decided on the location of their plant but are considering Sriperumbudur, Tamil Nadu as a possible location. They expect to roll out 2 mn handsets per month and other components from this facility.

Wynncomm Mobiles, a SAR Group company that is into power solutions like batteries and inverters, fancy a similar dream. They have earmarked `250 crore investment for their manufacturing plant to be set up in the SEZ of Himachal Pradesh. They would roll out 1 mn handsets and tablets per month from that plant. The firm has plans to export its products to countries like Nepal, Bhutan, and Saudi Arabia, besides selling in domestic market.

Though 3G services are launched in this fiscal, a full-fledged service is still awaited and is expected to be a common place in the current year. This means that 3G phones would see a bigger traction which could trigger entry of more 3G enabled handsets at a cheaper price.

Gyana Ranjan Swain
gyanas@cybermedia.co.in