Yet to Shine

The fixed phone segment recorded a 7% decline in market size from Rs 430
crore in FY 2006-07 to Rs 400 crore in FY 2007-08. In value terms, the market
size was close to 10 mn units, which includes the grey market.

Two players-Bharti Teletech and National Panasonic-dominate the segment.
Bharti Teletech retained its position as market leader with more than 61% share.
National Panasonic, on the other hand, has a market share of around 20%.

The top five customers for Bharti include Tata Teleservices, HCL, Pantaloon,
Coral Telecom, and India Today. Last year, Bharti introduced four new
models-CB48000 (cordless phone), CB67000 (slim cordless phone), DB6700 (phone
with SIM card reader), and DB5900FM (landline phone with FM radio)

Though the market did not grow last fiscal, the players believe that this
year the market is geared for growth. The prime reason for this optimism is the
growth of the broadband sector, which is emerging as the key driver of the fixed
phone segment. Currently, there are 3.5 mn broadband subscribers in the country,
with expectations of exponential increase in the current year. Mostly, broadband
comes bundled with a landline and this is likely to provide the much-needed
impetus to the market.

The fixed phone segment is witnessing an increasing shift in consumer
preference toward feature-rich phones with features such as FM radio, large
displays, phone book, longer battery back up, and speaker phones.

National Panasonic is planning to introduce a new technology, 'DECT', in the
cordless segment. DECT is a digital wireless technology for cordless telephones
and wireless lines. Further, the company is looking at recording 20-30% growth
in the current year.

The market is driven by caller line identification (CLI) phones, which have
become the norm of the day. CLI, along with the cordless phone category, is
spearheading the growth by recording a growth rate of 15-20%. The 2.4 GHz
digital platform is the latest introduction in the cordless segment and has
recorded a substantial increase in demand. Bharti Teletech is providing CLI
phones to most of the service providers in the country.

Cordless and feature phones at affordable prices are set to drive the growth
of the Indian fixed line phone market. Last year, Bharti Teletech launched a
cordless phone at a mere Rs 995, and a CLI phone at Rs 445, the cheapest in the
arena. This also resulted in an extensive jump in the sale of cordless phones
for the company. The company also introduced feature-rich phones like those
equipped with FM radio or SIM card reader.

While prices are coming down and there is pressure on prices, the industry
players feel that they can decrease the loss as more and more consumers are
upgrading to higher value products.

The government has also waived the 6% license fee which is likely to have a
positive impact on the industry. The advantage of low tariffs and low entry cost
of fixed line handsets along with better voice clarity will set the market on
the growth path.

For Bharti Teletech, the key technology developments in the Indian fixed
phone segment during the previous fiscal include the offering of 2.4 GHz digital
spectrum to customers, introduction of audio-video conferencing, and the
availability of VoIP phones.

Going forward, feature phones are set to become more popular among customers,
considering the present market shift toward digital telephony. In the high-end
segment, customers will explore VoIP phone options while audio-conferencing will
further make inroads into the SOHO segment. Globally, cordless phones comprise
more than 70% of the fixed line phone market.

Fixed Wireless

The total market size of fixed wireless phones and terminals (FWP and FWT)
stood at Rs 800 crore in FY 2007-08 as compared to Rs 1,588 crore in the
previous fiscal, a negative growth of 49.6%.

LG was the leader in the FWP category in FY 2006-07 with more than 50% market
share, though currently its market share stands at 25%. But even with this
decline, the company retains the leadership position. The company recorded
revenues of Rs 200 crore from the FWP category in the last fiscal, down from Rs
792 crore, a negative growth of around 74%.

LG launched a new model in this category that supports SMS and has a battery
backup of upto two hours, and 800 mAH li-ion battery. LG sold CDMA FWP products
to TTML and TTSL, and FWT products to Reliance Communications.

During 2006-07, Axesstel stood at the second spot, but in 2007-08, ITI
occupies this slot. ITI recorded revenues of Rs 150 crore against supply,
installation, and commissioning of CDMA equipment and fixed wireless terminals.
However, the company is likely to be back in reckoning with plans to increase
its revenues by 50%. Last year, ITI introduced two-way CLI speakerphones, IP
phones, and IFWTs.

Axesstel's revenue from the fixed wireless segment for FY 2007-08 was Rs 100
crore, 58% down from Rs 238 crore in the previous fiscal.

Huawei is the only company in this space whose revenue has gone up from Rs 75
crore in 2006-07 to Rs 80 crore in 2007-08. The company supplies equipment to
the top five CDMA operators in the country.

Another prominent player in this segment is ZTE. The company recorded
revenues of Rs 75 crore last year, 59.5% down from Rs 185 crore the previous
year.

Preference for wireless over fixed line for broadband services (higher speed
and value added services), expansion planned into rural areas by USO, induction
of fixed GSM terminal, and introduction of WiMax for broadband are likely to
drive growth in the fixed wireless sector this year.

Companies operating in this area complain of the steep fall in prices of all
telecom products. Fixed wireless growth is likely to be affected by the steep
fall in tariffs for cellular phones and the consequent shift of subscribers to
cellular phones. This fall in prices renders manufacture unviable for most
telecom products.

The fixed phone segment is betting big as innovative features and broadband
is expected to drive the market. Owning to the growing trend of mobile phone
features like high-speed data, FM function and SMS, being adopted by fixed phone
vendors; the fixed wireless phone might grow in the current year.

Gagandeep Kaur

gagandeepk@cybermedia.co.in