Mobile Handset Market poised to change the Market Dynamics of Telecom in India
January 2009 Edition
As the need of Indian mobile phone consumers is evolving, they are demanding feature-rich devices, which can cater to their business communication requirements as well as their personal needs. Mobile phones are increasingly becoming status symbols, and a customer sees a mobile phone as an extension of his/her personality.
VARIndia takes a deep look into the evolving Indian mobile handset market.
The Indian mobile handset market has witnessed phenomenal growth in the past few years and has tremendous potential to take off in a huge way. It is one of the fastest growing markets in Asia and is considered to be one of the largest sectors in India. Increased innovation with better form factors, features and user-friendly interface is the ongoing trend. There is an extensive demand for various handsets across different price points as the mobile penetration is increasing at a rapid pace.
India being a developing country, its mobile market can be divided in two parts: emerging market and mature market. Emerging markets require vendors to provide low-cost handsets, which boost volume but reduce revenue and sometimes profit per device. On the other hand, mature markets have an appetite for higher-end handsets that can generate more revenues and profit. The leading vendors have been successful at balancing features and price for the distinct markets in a highly competitive space.
The Indian mobile entertainment market is also booming and is poised to grow further. There is scope for tremendous creativity in digital format. And the consumer is ready to adopt. The handsets in the years to come would be enabled to acquire, manage and share a wide genre of music, gaming and audiovisual content. They would have features like large screens, wireless LAN, high capability cameras, dedicated music and game keys. In fact, we will soon be able to see 3G handsets that would support lot of mobile multimedia applications like video calls, music downloads, high-speed Internet access, multi-tasking, 5-mega pixel cameras, etc.
Anil Arora, Business Group Head, Mobile, PCs and DAV, LG Electronics India Pvt. Ltd., says, “The market size of mobile handset market in India is approximately 100 million units. We have plans to sell approximately 5–6 million units of GSM phones in India in the year 2009. We would be enhancing our channel presence in most of the towns and products suited for all segments and India-specific products.”
Sunil Dutt, Country Head, Samsung Telecom Division, said, “India is one of the fastest growing mobile markets in the world with 8.0-9.0 million subscribers being added per month. The GSM subscriber base as of Dec’08 stands at 257.85 million.”
According to IDC’s Asia/Pacific Quarterly Mobile Phone Tracker, Q1 2008, June 2008 release, close-to 85 million mobile phones were shipped in India between April 2007 and March 2008, compared to just under-66 million units shipped over the equivalent period a year ago. This was a record and amounts to a year-on-year growth of around 29 per cent in terms of units.
India Mobile Phone Shipments (Millions) FY07 vs. FY08: Unit Shipments, Growth 2006-07 65.8 2007-08 84.9 Growth in Shipments 29%
FY 2007-08 also witnessed shares of higher-level air interfaces rising. EDGE and WCDMA-enabled mobile phones contributed 15.4% and 3.1% of the total mobile phone shipments in 2007-08 compared to 7.4% and 1.2%, respectively, in 2006-07.
India Mobile Phone Shipment (Millions), JFM 2007 vs. JFM 2008 JFM ’07 (Q1 2007) 17.9 JFM ’08 (Q1 2008)22.3 Growth in Shipments 24%
Shipments in JFM 2008 stood at more than 22 million handsets, which amounts to around 10,000 mobile phones being shipped every hour during the quarter. In the same quarter a year ago (JFM ’07), just under-18 million mobile phones were shipped.
Overall, Nokia retained the top spot with a market share of 52.8%, followed by LG at 10.2%, and Samsung at 8.3% in terms of units shipped during the quarter ended March 31, 2008.
Types of Mobile Handsets Mobile handsets can be categorized under various parameters. They can be divided based upon their features, functionalities, price points, multimedia capabilities, storage space, etc. Thus, there are many such categories such as multimedia phones, PDAs, smartphones, gaming phones, touchscreen phones, entry level, high-end multimedia and business phones.
The Emerging Smartphone Market A smartphone is a mobility device that runs on an Operating System, allows applications to load upon it and has data handling capabilities. The market of such phones has shown tremendous growth in 2008 with around 1.5 million devices being sold in India, as per estimates. Smartphones are no longer considered as just Enterprise products but also products which have a style statement.
With workload mounting today professionals have started to look at connectivity solutions as a must-have feature in their mobiles. The enhanced multimedia features also have caught the fancy of many. As the usefulness of these devices has started to entice more people, the demand has soared. Factors like competition and reduced prices have contributed in bringing them within reach for a wider segment of people. Currently, HTC has a market share of about 20 per cent and has grown by a whopping 300 per cent over the previous year.
Growth Driver The growth of the Indian mobile handset market is fuelled by devices across various verticals. Convergence is the buzzword today, with people seeking devices that bundle mobility, connectivity, entertainment and faster Internet browsing in their handheld devices. Thus, converged devices are witnessing a huge spurt in demand in recent times. Also, with the next phase of growth coming from rural India, low-cost and entry-level handsets are also driving this boom in a tremendous way.
Ajay Sharma, Country Head, HTC India, says, “In India, we have adopted the Channels as a medium for go-to-market strategy and we largely believe that Channels are a critical part and a lifeline of our business. They figure prominently in our planning and strategy process. In India, we currently follow a three-level channel structure with a National Distributor->City Redistributor->the end retailers. We believe that such a structure enables us to reach out to the market both wide and deep. Currently, we have a strategic tie-up with two national distributors, and also have an alliance with the leading mobile services providers in India to market our devices.”
“We are actively exploring opportunities to sell our products through IT channel partners for an increased penetration and better technical know-how, which is extremely significant to keep pace with the latest technologies in the telecommunication sphere,” he added.
Dutt informs, “Product innovation and channel expansion will be the key factors driving our growth .Our efforts will be in the direction of strengthening our 3G portfolio as well the touchscreen and the music segment. To tap the semi urban markets, the Guru portfolio has been further strengthened in Jan 2009. We are adding value even in the mass segment by adding value added features like FM, Slider, Torch, longer battery life and Mobile tracker. We have introduced E1410 , Guru phone with Music features like FM + Recording , music keys , Dual speakers , MP3 Player , Bluetooth --- priced at Rs. 3429/- in January .We also have Guru 520 , Guru Music with Slider , which is priced at Rs 3499/- . We introduced E1117 with FM and 11 hours talk time. We now have 11 models in the Guru series priced in the range between Rs 1619/- to Rs 3499/-.”
Cheap Chinese Handset Market The Indian mobile handset market is flooded with cheap Chinese handsets, but any Chinese manufacturer cannot add to the status symbol that the customer aspires for. Also, more importantly, customer seeks value for the money before purchasing a product, after-sales service, durability, warranty and guarantee and a brand name which Chinese manufacturers can not provide. Chinese manufacturing is cost competitive, but when it comes to issues like service and quality they lack on both the fronts.
The Chinese mobile handsets that flood the Indian market may be a cause of cheer for consumers but definitely not for the Indian security agencies. The Department of Telecom (DoT) is planning to block cell phones which do not bear the International Mobile Equipment Identity (IMEI) number. And, most of the cheap Chinese phones do not have an IMEI number.
There are approximately 1.5 crore China-made and locally-assembled handsets in use that do not have IMEI numbers. Sales of Chinese handsets constitute about 13 per cent (or Rs 4,000 crore) of the Rs.30,000-crore annual mobile handset market in the country.
Dutt says, “The Government’s initiative on IMEI numbers will definitely serve as a useful tool to counter the small but fast growing market of low cost Chinese handsets.”
Adds Sharma, “We do not see the Chinese mobiles as a threat or competition to HTC. We have confidence in our devices and have a conviction that HTC’s strong focus on innovation and design is unparalleled and that an Indian customer understands the value attached to the brand and its commitments.”
Retailer Opportunity Retail chains will certainly grow and give to Indian customers a unique shopping experience which they would have never experienced before. Retail chains and individual retailers will both work hand in hand, though the growth of modern retail will be high as compared to traditional channel, but traditional channel will still rule the mobile industry with a significant share.
The handset market is definitely a lucrative avenue for the retailers and the distribution channel’s expansion and growth. Increase in demand has resulted in companies ramping up their channel base and contact points. It is a win-win situation for the retailers, who stand to gain in this high-growth scenario, wherein not only the replacement handset market is expanding, but with mobile operators adding about 8–9 million subscribers in a month, the demand is increasing all the time.
Challenges The grey market continues to be a challenge for handset manufacturers. “We aim to overcome the same by harping on quality and technology that branded products have to offer to the consumers,” adds Arora.
Secondly, Indian consumer is very price conscious, and while choosing a product they generally opt for one that gives them the maximum value proposition. “Our aim is to achieve better price points to really drive volumes to attract the attention of the discerning Indian consumer,” said Sharma.
Upcoming Trends Given the global economic downturn, the growth of Indian mobile industry will not be affected as the slowdown does not impact Indian telecom demand. The trends in 2009 will be full multimedia phones (fully-loaded phones) and touchscreen phones will gain greater acceptance in the market.
The Smartphones in the near future will be even more feature-rich with aggressive marketing strategies. With the advent of the 3G platform in the country, one of the biggest trends in the smartphone segment will be the increased focus from voice-centric handsets to data-centric ones. Innovations, technology and applications will make them more of a necessity. M-commerce and open source software should make their presence felt in a huge way. The increasing demand will also contribute in pushing prices down.
“I think product innovation in the multimedia segment – Touch, camera, music will fuel the replacement market while the semi urban markets will show a strong acceptance of entry level mass products. Launch of 3G services will also act as a strong factor to fuel replacement market,” concludes Dutt.
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VARIndia takes a deep look into the evolving Indian mobile handset market.
