The Hindu Business Line : Cell evolution

TECH freaks certainly have much to look forward to. With the mobile handset market in India maturing at a rapid pace, not only are an increasing number of companies entering the arena, firms are also coming out with innovative features to catch up with the dynamics of consumers' rapidly changing tastes.

The last couple of months have seen at least three-four new GSM handset brands make a beeline for the Indian market. This includes the likes of LG Electronics, the Taiwan-based BenQ, and the China-based Bird International. In addition, a leading Taiwanese player, DBTEL, has announced its intention to launch over 10 GSM models in India by November, and it is primarily targeting the lower-end of the market.

Further, a few Indian companies have indicated their plans to enter this segment soon. The reason for the heightened activity perhaps lies in the profile of the market, which many term to be the second largest in Asia. Points out Ashish Bakshi, Country Head, BenQ India: "It would be estimated at 16-18 million handsets by next year. According to Gartner (a research firm), this figure is likely to touch 70 million by 2007. This would translate into a compounded annual growth rate of about 40 per cent."

In addition, the number of cellular users soared 115 per cent to 18.3 million in the year to September. According to market estimates, the number of cellular users is expected to jump further to 100 million by 2008. Says Ravi Sharma, Managing Director, Alcatel India, the Indian arm of one of the top five suppliers of cellphones globally: "We were not very active earlier because about 80 per cent of the sales was coming from the grey market, which meant that the organised market was only about 0.8 million, a minuscule number. The situation has, however, changed in the past six months, with the growth in mobile phones being more than a million a month. The legal market for handsets is now estimated at 12-13 million."

Adds Anuj Kapur, Country Head (Telecom), Marketing and Infrastructure, Samsung India, "The key drivers for this growth have been the reduction in tariffs, aggressive price points, attractive packages from service providers, expansion of networks to smaller markets, the consequent increase in penetration, and finally the growth in services like SMS and MMS."

Interestingly, the growth is not merely price-driven; features are increasingly driving it. As a result, while firms are keen to have at least one model at the entry-price level, the major focus is on making available newer features in the market. "The definition of an entry-level handset has changed and will continue to do so. About three-four years ago, an entry-level handset offered basic voice functionality and little else. This has changed now as consumers are going in for handsets which are packed with value-added features," says an industry official.

Little wonder then that companies such as LG, Panasonic and market leader Nokia are actively focusing on the mid- to high-end of the market. Says Praveen Valecha, Country Head (mobile phones), LG Electronics: "The market has matured a bit and people are ready to pay for more features. For instance, these days, colour phones are in great demand, which we will also focus on. We expect that by mid-2004, more than 50 per cent of the handsets will be colour. Other features which are popular include MMS, camera phones, and entertainment-related features. Apart from this, looks, style and design are still major factors when it comes to buying a phone."

LG, on its part, has introduced two new models in the market and intends to roll out five more by the end of the year. "This will include a new camera phone with a very unique design," says Valecha. The company is targeting to sell over four lakh GSM handsets in the Indian market in the next calendar year and corner a 12 per cent market share in the next two years.

BenQ too will focus on the mid- to high-level segment, with an aim to offer more features at a lesser price. "We intend to redefine the mid-level segment by giving customers value-added features at a competitive price. We are targeting the customer who aspires to buy certain features but cannot, due to the steep prices," says Bakshi.

BenQ has rolled out two new models in the market, and intends to roll out six more by December in the price range of Rs 5,500 to Rs 15,000. "We are targeting a market share of five per cent by 2004," he says.

BIRD International, the largest mobile phone manufacturer in China, intends to have a product offering in every price segment of the market, though the focus would also be on newer features. Among the phones lined up for launch later are those with features such as SMS remote control, PDA phone-carrying device and so on. The company is targeting sales of three lakh units by 2004.

However, Alcatel, which is drawing up an aggressive strategy for the Indian market, feels much of the growth would be coming from the entry level. The company has already come out with a handset priced at Rs 3,199 (which comes with an AirTel connection), packed with features such as a speakerphone, and runs on a lithium-ion battery. Incidentally, the company is the only player in the market offering such features at a price below Rs 4,000. "With the number of first-time mobile users growing, the share of entry-level phones is set to grow from the current 25 per cent to about 45-50 per cent. So, we will address this end of the market first. We are targeting to capture about 10-15 per cent market share in the next 1-2 years," says the company MD, Sharma.

The company would also be rolling out new models in the mid- and high-end segments with features such as camera phones and colour screens. "However," points out Narendra Nayak, Country Operations Manager-PCS, Motorola India, "it would be unfair to say that a particular handset segment is the fastest-growing. India has a low cellular base that is growing at a phenomenal rate. This, coupled with the falling handset prices and increased features in handsets, is resulting in all handset market segments growing. While the mid- and low-end segments might have the maximum volume of sales, the high-end segment is growing off a smaller base and has higher revenue per product."

Motorola has been actively introducing handsets in different segments over the past few years. It launched 11 products across various price points last year. This year, the company has already introduced seven new products (both GSM- and CDMA-based) in all segments and plans to launch at least four more handsets before the end of 2003. These would include features such as camera, colour display, MMS/EMS, games and GPRS.

"Motorola is among the top handset vendors in India and our strategy is to grow our local market share in line with our international market share of 25 per cent," says Nayak.

According to Motorola, mobile gaming is the next big thing in handsets, as phones become more powerful and come with colour screens. As people generally feel more at home with gadgets like mobiles, they will experiment more and want to do different things on them.

"In India, mobile gaming is a relatively nascent industry. The uptake of gaming using mobiles in India is still in the early stages. The advent of colour phones with multimedia capabilities and more processing capabilities this year, and falling prices are providing an impetus to mobile gaming amongst Indian consumers. Over the next few years, we expect gaming to emerge as a revenue stream for operators," says Nayak.

Another encouraging trend is that the replacement market for GSM handsets is also growing at a rapid pace, with people changing their phones as frequently as every three-six months. "On an average, estimates reveal that about 15 per cent of the consumers are replacing their handsets every two years," says LG's Valecha.

Meanwhile, with competition hotting up in the market, handset brands are emerging as one of the highest spenders on advertising and marketing in the consumer electronics category. At present, there are at least 12 handset brands present in the market. While players such as Nokia, Motorola and Samsung have been advertising aggressively, more firms are firming up their marketing strategies. Panasonic, for instance, has signed up Bipasha Basu to promote its brand of cellphones in the market. "We intend to launch four-five new mobile phone models this year in the mid-upper segment, which is also our focus segment. An entry-level model would be introduced only in April next year," says Shashi Bhushan, Manager (Marketing), Systems Product Division, National Panasonic India.

BenQ too has outlined about Rs 10-12 crore to promote the brand in India and achieve its market share. Nokia, which has been investing substantially in promoting its products, is focusing on the distribution end and is opening exclusive outlets for its products. Motorola is setting up exclusive `Moto' outlets across India. Alcatel, meanwhile, has struck a distribution alliance with Videocon and would be retailing through about 40,000 outlets.

Samsung India, after setting up an exclusive Samsung Mobile Plaza (SMP) in Mumbai recently, said it will be focusing on shop-in-shop stores — Samsung Mobile Privileged Partners (SMPP). The company will be launching close to 75 such shops across the country within this year.

With the share of the grey market set to fall further, the Indian handsets market is all set to boom. According to market watchers, there is still a price differential of about 20 per cent between the organised and grey market due to the prevailing duties. As the market becomes increasingly attractive for handset brands, Indian consumers can look forward to being wooed by the best technology in the market.

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