Phone makers resist price hike despite falling rupee

Despite the rupee depreciating against the dollar, mobile handset makers are hesitant to increase prices because of high competition.

Local players such as Lava Mobiles and Fly Mobiles, which import all of their phones, are taking the biggest hit due to the rupee depreciation. These players are waiting for big brands such as Nokia and Samsung to cut prices.

“With dollar shooting up against the rupee, cost of realisation has gone up over the last two quarters and right now it is stressing. There is pressure, but we cannot pass on to the customers every now and then. Even big players like Samsung are not increasing prices because of such reasons,” Mr S. N. Rai, Co-founder and Director, Lava Mobiles told Business Line .

This is in sharp contrast to what's happening in the personal computer segment where manufacturers such as Lenovo and Dell have increased prices by Rs 1,500 and up to 10 per cent, respectively, over the past few weeks

But with over 100 local brands and at least 10 foreign players in the market, mobile handset players are willing to ride out the currency devaluation. “Right now the trend is about innovation, especially in high-end segments. Our focus is on innovation and increase range of smart phones. Growth in the industry over a period of time would only lead to cost of the products to come down,” Mr Vipul Mehrotra, Director and Head of Smart Devices, Nokia India, said.

Samsung India, second largest mobile company after Nokia in the country, also said there is “no change in prices at the moment.”

In November 2011 handset makers had increased phone prices by 10-15 per cent across various models due to a weakening rupee. The rupee had weakened about 17 per cent against the US dollar since January 2011, hitting an all-time low Rs 52.73. This time round the rupee has further weakened to Rs 55.85 to a dollar but handset makers are hoping to absorb at least for another two months.

Phone makers are also wary of affecting another price increase. Lava, for instance had increased prices by 12 per cent two months back when dollar rate was at peak. “Lava would not increase prices any time soon and even if it does it would by five-six per cent,” Mr Rai said.

“However, the market is expected to stabilise in the near future with Reserve Bank of India's recent announcement of interest rate cut,” he said.

Phone makers are also involved in a price war in different market segments. “Price competition continues to prevail especially in the low end segment,” said Mr Prem Kumar, Chief Executive Officer, Fly Mobile said.

He said as the market is changing fast with new products such as tablet personal computers and smartphones and companies are looking at placing specific devices for a particular market at competitive price points.

Leading local company Micromax said as of now there is no plan to increase prices. “However, if the dollar goes up again, we may look at a price increase between five and seven per cent,” a spokesperson said.

>ronendrasingh.s@thehindu.co.in

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