The Hindu Business Line : A smart proposition

A changing price-volume equilibrium has hit the smartphone market in the country. With nearly a 30-35 per cent drop in prices of smartphones in just 12 months, cell phone users in the country are increasingly updating their Facebook status, listening to MJ's Black or White or scrolling down the cricket scoreboard, all in the groove of their palms.

The smartphone market in the country is currently estimated at about five million units. Around 20 million smartphones are expected to be sold by 2010. Smartphones (phones with advanced functions beyond what the average phone offers, such as Internet, e-mail, in-built keyboard, music player, touch screen) hog about eight per cent of the cell phone market in India. What is exciting smartphone manufacturers who are rushing to dot the landscape is the jump in the number of users, almost doubling year on year. According to a Euromonitor Report 2009, retail sales of smartphones doubled in 2008 over the previous year, reaching more than three million units.

What's more, it's not just the Nokias and Samsungs that they are holding but some uncommon brands such as Karbonn, Micromax and Coolpad too. While Nokia, Samsung and Sony Ericsson still enjoy large market shares, lesser-known brands are sneaking in almost unnoticed and carving a market for themselves with smart yet relatively inexpensive hand-helds.

Needless to say, the entry of these new players has suddenly made the field more price-competitive. The smartphone market in the country is set for competitive price play with prices ranging from Rs 5,000-11,000.

While the overall handset market is witnessing a price drop of 7-10 per cent every quarter, the trend is expected to be similar for smartphones in the coming months, says Sarup Chowdhary, CEO & Director, Reliance Webstore, a multi-brand digital retail chain from the Reliance ADAG group.

Recently, Coolpad Communications (a subsidiary of Hong Kong-listed China Wireless) tied up with Reliance Webstore to launch its Coolpad smartphone priced at around Rs 10,000. “We are looking to have an attractive pricing strategy in India. While Coolpad 2938 is priced at Rs 10,999, we will introduce two smartphone models in India priced below Rs 8,000 soon,” says Sami Al-Awati, Managing Director, CoolpadCommunications.

Bangalore-based United Telelinks, which launched the Karbonn brand (the entire range comes with dual SIM facility), has priced the entire range sub-Rs 8000. Gurgaon-based Micromax recently partnered with MTNL to launch a 3G-enabled handset at Rs 5,499.

Not just the big 'uns

Though Nokia is still the clear leader in the smartphone market with close to 40 per cent market share, even the best known name in the industry has realised that smart pricing does push the brand faster. Vipul Sabharwal, Director (Sales), Nokia India, says the company is also expanding smartphone capabilities and features into the mid-range, such as the Nokia 5230.

PC vendors too see potential in the smartphone business. Taiwan-based Acer, which launched its smartphones in India last year, is looking to make these gadgets affordable to the mass market. Last year, it introduced phones priced at about Rs 16,000. Just last week, it came out with the beTouch E101 model for the mass market (targeted at the youth) for Rs 11,900.

The smartphone is suddenly proving to be a “definite value proposition” for the consumer. The cost-efficiency drive, primarily driven by the newer players, will usher in mass adoption of smartphones in the country, say industry experts. But how does the economics work out for these relatively smaller players? “It's the result of our R&D where our overheads are cheaper and development cycle faster,” says Sudhir Hasija, Managing Director, United TeleLinks.

And it's not as if these small companies are banking only on attractive price points to bring in the ‘smart' user. The phones come loaded with all the hi-tech features that new-gen consumers crave.

Karbonn phones, from Bangalore-based United Telelinks, come laden with rich features such as one-touch music player, advanced mobile tracker and dual SIM mode. Besides offering CDMA and GSM modes in the same handset, Coolpad smartphones operate on Windows CE and have features such as multimedia and PDA capability, e-mail, touch speed-dial, private mode and SMS font-size change.

And all these brands have big plans for the country in terms of investment and brand building. Riding on the changing consumer expectations where pricing and hi-tech features have become a priority, these newer players are gung-ho about their performance in the next one year.

Coolpad has plans of investing close to Rs 400 crore in the next five years in India, while United Telelinks is looking at investing about Rs 300 crore in the manufacturing unit at Bangalore. The company has, so far, invested close to Rs 100 crore in its R&D centre and plans to pump in an additional Rs 100 crore this year to market the brand.

Karbonn has roped in the South African cricket team Cape Cobras for its branding exercise. After having sold 600,000 phones last month, Karbonn is eyeing a 10 per cent market share by March 2010. Reliance Webstore expects 30 per cent of its handset revenue to come from Coolpad smartphones soon.

Sami Al-Awati says the company's partnership with Reliance Webstore Ltd will help it access end-consumers in over 700 Indian cities, enabling Coolpad to drive product development in line with specific customer needs. Coolpad believes the Indian smartphone market's vertical rise would be driven by key factors such as disruptive innovations in mobile software and hardware, a rising consumer demand for mobile data (for instance, messaging, browsing, applications), faster wireless networks and the mass market smartphone and data pricing.

Praveen Bhadada, Engagement Manager of Zinnov Management Consulting, a management consulting firm, is, however, sceptical of the new wave hitting the Indian smartphone market, “Though Chinese brands are starting to penetrate the market with their low-cost mobiles, the user confidence is still not there. A majority of smartphones users are key people in an organisation and the business relies upon these smartphones. People are still hesitant to consider these options. However, for first-time users and the young generation, these low-cost smartphones offer a lucrative proposition,” he says.

While the new players may have the price and product to woo users, working their way to the top in a market that is still obsessed with big names does call for some strategic thinking. Big brands too have to have their thinking caps on constantly. Well, whoever emerges smarter, the consumers will surely have the last laugh.

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