Segments: Mobile Handsets: Paid For A 'Lifetime'

It was a memorable year for the handset market as mobile services industry
added 5 mn lines for couple of months overtaking China's net addition in the
mobile space. And all this was possible, thanks to the 'Lifetime Validity'
scheme offered by service providers across India. 

The overall numbers look attractive both on the CDMA as well as the GSM
front. In volume terms, India witnessed a total addition of around 11 mn CDMA
handsets and 33 mn GSM handsets in FY 2005-06. In total, the country saw an
addition of around 44 mn mobile handsets. So, in growth terms, we have grown by
around 185%. With many additions on CDMA, the ratio of CDMA vs GSM
has changed from 20.5:79.5 to 25:75.

In terms of value, India's mobile market in FY 2005-06 has crossed the five
figure mark and is estimated to be around Rs 14,258 crore ie $3.17 bn. In growth
terms, the market has done exceptionally well and has grown by around 62%. CDMA
has grown by 164% whereas GSM has grown by 62%. In terms of revenue mix, CDMA
contributed 26.4 whereas GSM contributed 73.6%.

CDMA vs GSM

In the handset category, CDMA was the star attraction in comparison to GSM
in FY 2005-06. LG continued to dominate the market with 60% share whereas in GSM,
Nokia was a clear leader with increased market share of around 10% points from
FY 2004-05. It presently, has a  market
share  around 72.5%.

In terms of distribution there is a clear demarcation between CDMA and GSM
phones. CDMA is distributed directly through operators, except Nokia, which
distributes handset through Brightpoint whereas in GSM it is majority through
open market.

In both the categories, we have seen entry of new players. In CDMA, Huawei,
Jinpeng, and Haier made good moves whereas in the case of GSM it was BPL, Spice,
and i-Mate. Even UTStarcom has lunched CDMA products in the Indian market and
plans are to launch GSM handsets later in the year.

The entry of Chinese players in the CDMA space helped price cuts in CDMA
space whereas in GSM, the sheer number of competitors was enough to keep prices
at bare minimum. All this has helped the end buyer as he/she is getting more
value for a given price.      

The Players         

Nokia has done exceptionally well in the GSM space and commands
around 72.5% market share. None of its competitor can match Nokia's strength
in any category, be it distribution network, number of handsets launched in the
Indian market, and price points at which the phones are available in the Indian
market. In the CDMA space, Nokia lost its number two position and was ranked at
number four with market share of 7.3%. It seems, Brightpoint strategy is not
working for them, as CDMA market is still operator driven with huge subsidy.   

Nokia is a leader in each of the categories and has launched around 20 models
from entry-level phones to high-end phones such as N-series.
Some of the phones do have 3G capability and would be handy when 3G
services are launched by service providers. In terms of localization, the thrust
is on Hindi, Marathi, and South Indian languages.

On the distribution front, Nokia phones are distributed through HCL
Infosystems, but with the market expanding, the company is looking at direct
sale of handsets. The company has already started the process and presently, has
its own distribution network in Jammu & Kashmir and North East.

With the CDMA market doing well, LG benefited a lot and now holds the
number two position in the handset space. LG is still dominating the CDMA
space whereas in GSM, it is still trying to hold 3% market share. In the CDMA
space, the company launched around 12-13 models, but its best selling model was
RD 2340 and RD 2430. All this has helped LG to maintain around 60% market share
in CDMA space.

For Samsung, there is a dip in market share, but in the overall handset
category it is still at number three, thanks to its excellent performance in
CDMA space. In the GSM space, the company leads in the folder phone category. In
FY 2005-06, the company launched close to 12-13 models focused on mid, mid-high,
and high-end categories. For Samsung, the heroes were X200 in the mid end, X640
in the VGA category, and in the high-end it was
X700, D500, and D 600.

In the CDMA space, their strategy with operators have paid off as they have
grown by around 242%, whereas in the GSM space they have to still work on the
handset models, which will help Samsung to move up. 

Sony Ericsson's strategy of multiple distributions has paid off, as the
company has grown by 105%. The phones are now distributed through Salora
Intenational, Ingram Micro, and Sony World. The walkman strategy has done well
for Sony Ericsson and the company is now aggressively looking at imaging and
enterprise strategy.

Motorola is doing well in 2006, but in FY 2005-06 the company has shown a
negative growth for GSM. Overall, the company has recorded revenues of Rs 507
crore. This year, is crucial for Motorola, since distribution strategy is paying
off and the company is doing well in low as well as high-end categories for few
selected models. The company has to focus on launching new models every quarter,
if it plans to regain its lost glory in India.   

ZTE was a major surprise in the handset category as the company jumped to
number two spot in the CDMA space with revenue of around Rs 360 crore. The Tata
Teleservices bundling helped the company move up. On the other hand, Kyocera has
grown by around 43% thanks to its tie-up with XL Telecom. XL is also planning to
create a distribution network across the country and plans to reach
10,000 multi-brand sales outlet in a year. 

The Chinese players-Huawei, Jinpeng, and Haier have made inroads in the
Indian market and all these players are aggressively looking at the CDMA space.
UTStarcom is also planning to leverage its operator relationship and plans to
soon offer  low-end as well as
high-end products in the CDMA space and mid end phones in the GSM space.