The Middlemen

Among the fastest growing sectors in the country, telecom has
been zooming up the growth curve at a fiery pace. The last few years saw India
adding many firsts to its list of achievements. Some of these are: the world's
lowest call rates (Re1/minute), fastest growth in the number of subscribers (6-7
mn per month), fastest sale of a million mobile phones (1 week), the world's
cheapest mobile handset (Rs 777), and the world's most affordable color phone
(Rs 1,234).

Ever wondered who, apart from telecom service providers and
handset manufacturers, have helped achieve these distinctions? The middlemen!
These middlemen are muscular, have a pan-India presence, and good nexus with the
top brass of the telecom industry. And, they are growing at a rapid pace. For
the industry they are not the main revenue earners but their contribution is
prominent. They are the distributors and retailers of the telecom industry. Yes,
these are the people who made it possible for every Indian to get access to a
mobile phone. They have achieved some targets-a lot still needs to be
achieved. And, they are on the prowl.

Who are They?

In terms of distribution, there is a clear demarcation between CDMA and GSM
phones. CDMA is distributed directly through operators, except Nokia and
Motorola, who distribute handsets through Brightpoint. Whereas in GSM, it is
through the open market. Nokia phones are distributed through HCL Infosystems,
but with the market expanding, the company is looking at direct sale of
handsets. Early last year, the market leader Nokia decided to rework its 10-year
alliance with its distribution partner, HCL Infosystems. The new agreement has
led to Nokia venturing into direct distribution and sales for the first time
since its entry into India a decade ago. Even as HCL Infosystems continues to
remain its sole distributor and marketing partner, till 2011, this will be
applicable to just half the country's geography, with Nokia India to take over
distribution and sales of the other half by 2008.

Brightstar is the largest wireless products distributor in the
world and had launched its subsidiary in India, Brightstar Telecom, in 2005 to
support the high growth market. To best serve this market, the subsidiary
operates two main sales and distribution offices in Mumbai and Delhi, as well as
22 main hubs supported through 79 billing points throughout the country. This
infrastructure allows Brightstar fast delivery, localized distribution and
billing support across India. Brightstar is the sole distributor of LG GSM
phones. According to HS Bhatia, business head, LG GSM mobiles, "The
challenge in India is not the overwhelming demand for wireless handsets, but
rather the ability of manufacturers to reach consumers quickly in our highly
fragmented marketplace. Ability to distribute products anywhere across the
country and provide speed-to-market are key components for success."

Ingram Micro is the largest distributor for IT and telecom
products in India and is the national distributor for Sony Ericsson. This
company has more than 50 branches in India, and through Ingram Micro, Sony
Ericsson is having a presence in more than 15,000 retail outlets. Sudhin Mathur,
general manager, Sony Ericsson, India, says, "With the enhanced portfolio
of products across segments that we have to offer from the start of 2006, now is
the right time to consolidate and further the inroads we made into the booming
market last year. The tie-up with Ingram would help us make a Sony Ericsson
handset available to even the farthest consumer in the country." Salora
International is the second national distributor for Sony Ericsson. It is also
the national distributor for BenQ mobiles. Salora has more than 4,000 retailers
out of whom 3,500 are loyal retailers who place orders for products every month
on a regular basis.

RPG Cellucom

RPG Cellucom, the joint venture between the RPG group and Dubai-based mobility enabler, Cellucom is one of the largest retail stores for IT and Telecom products. Currently they have fifty-one stores in four major cities like Delhi, Gurgaon, Pune, and Mumbai. Apart from IT products, they endorse most mobile brands that are available in India. The joint venture will invest Rs 2,000 crore on mobile and IT retailing by the end of the calendar year. The company is acquiring 1.5 lakh sq ft of retail space. RPG Cellucom is in talks with authorities and officials to sell laptops and other IT products in Apna Bazaar chains. They have also tied up with Spencer's Daily outlets in Pune. The company started its operations with its first stand-alone outlet in the Sahara Mall, Gurgaon, and has been aggressively growing since then. It now has presence in all the leading malls in Delhi and NCRs. It has plans to open over 500 exclusive retail outlets in other metros and cities by the year-end.

MobileStore

The company has already launched around 222 stores in sixteen cities, including Mumbai, Delhi, Kolkata, Hyderabad, Chennai, Bangalore, and Ahmedabad. The stores are of three formats: large-1,000-1,500 sq ft; medium-800-1,000 sq ft, and compact-200-400 sq ft, which will be part of shopping malls and high streets, in addition to stand-alone locations. The MobileStore houses a range of mobile handsets, in addition to telecom solutions, bill collections, handset exchange and repairs, etc, as well as accessories and value-added services. While other offerings will include digital cameras, iPods, gaming devices such as Xbox, and direct-to-home (DTH) connections. They plan to have 2,500 outlets and 4,000 touch points covering 600 cities in the next three years.

Getting Organized

The retail market for mobile phones-handsets, airtime and accessories-is
already a Rs 75,000 crore business, growing at over 20% per year. In comparison,
the consumer electronics and appliance market looks paltry, at just Rs 25,000
crore with a growth rate just half of the mobile market. Also, there are more
than 90,000 retail outlets in the country out of which only 1% are organized.
The figure is lucrative enough for entrepreneurs and business houses like Essar
and BK Modi group to plunge into. In a span of three years we have seen an array
of retail chains like Mobile Magic and Mobile NXT opening their stores
exclusively focusing on the mobile business. Already big names in retail
business, Pantaloons and Subhiksha are not far behind.

India has already emerged as the fastest growing mobile market
globally, with close to 5 mn new handsets and 7 mn subscriber additions every
month. And, this has compelled telecom distributors and retail houses to look at
this business more seriously. Romy Juneja, founder and COO, MobileNXT says,
"India thrives on a huge distribution market and that's why local players
will have a big role to play in mobile penetration." He also added that a
consortium of investors with a $5 mn investment is backing the Bangalore
headquartered company.

Pantaloon Retail of the Future bazaar group has recently floated
a separate company called Convergem Retail India to cater to growing demands of
the mobile industry. Investments to the tune of Rs 100 crore have been earmarked
for this venture. As of now they are quite successful, as the group has opened
its outlets in its existing Big Bazaar stores across the country, thus cutting
down on real estate costs. "India has 160 mn mobile subscribers and we are
looking at 50 mn more this year, translating into a huge opportunity for mobile
retail," says Malini Chopra, head of Convergem. The Mobilestore, another
chain of retail stores, is a joint venture between the Essar group and Richard
Branson's Virgin group. As of now they have opened 200 plus stores in India,
which is a testimony to the success of this business model.

Subhiksha, a big name in the retail business, has around 500
outlets in the country, and has also taken the bait of the mobile opportunity.
It started with the mobile business in Delhi, and is now expanding to other
cities. As per its managing director R Subramanian, Subhiksha is planning to
open shop-in-shops in all of its existing stores across the nation. This retail
company is all set to invest Rs 300 crore in its mobile retail business in the
near future.

A New Idea

As more and more people become tech savvy, the idea of a mobile store
selling its products online is not a bad idea. Though portals like Indiatimes,
Rediff or NDTV shopping sell mobile phones along with other items online,
Chennai-based UniverCell has gone one step ahead by selling mobile phones and
all other accessories online. It is focused only on the mobile business, unlike
other portals. UniverCell is selling mobile phones through its website,
UniverCell.In. All you need is a credit card to buy your favorite phone next
time. The cool feature about UniverCell is that it lets you compare phones
side-by-side just like in the showroom, and helps you to arrive at a decision.
It stocks almost all the models introduced in India by Nokia, Sony-Ericsson,
Motorola, LG, Samsung, and others at both higher and lower end of the price
band.

More Ways than One

There are a lot of other means to do this business than only through the
distributors or retailers. Along with action on the urban retail front, mobile
handset manufacturers like Motorola are also attempting to make in-roads into
the rural parts of the country through tie-ups with the likes of ITC's e-choupals
and DCM Shriram's Hariyali Kisaan Bazaar, a chain of rural utility marts for
sale and distribution of their handsets. These stores mainly cater to the needs
of rural people. "For rural areas, one has to set up a viable model by
piggy-backing on the existing distribution model where focus would be on cross
player tie-ups, use of existing channels like the postal department, public
distribution system and others," says James V Abraham, VP and director, The
Boston Consulting Group, India. According to Payal Gaba, head, Marketing, Spice
India, "We are in talks with the postal department to sell our products
through them." Some handset manufacturers are also in talks with local
co-operative banks in villages to sell their products to the village folks.

Future Perfect

India offers an unprecedented opportunity for telecom service operators,
infrastructure vendors, manufacturers, distributors, retailers, and associated
services companies. Not to be left behind, Indian cellular operators have lined
up investments of about $20 bn over the next two years to bring over 80% of the
population under mobile coverage. The planned investment for the next couple of
years is 50% higher than it has been in the last 12 years. And all this spell
more activities on the telecom front, a 'chappa chappa' approach (or 'match
box') is not far from reach as long as the stake holders of the industry-service
providers, manufacturers, distributors, and the regulators-work in tandem.

Gyana Ranjan Swain

gyanas@cybermedia.co.in