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September 2, 2014
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September 2, 2014

Handset: Slow Pace

The handset market recorded a growth of just 7.9% in FY 2008-09 in comparison with 11.9% growth in FY 2007-08. While Nokia managed to retain its supremacy with 64% marketshare followed by Samsung which increased its marketshare from 5% in FY 2007-08 to 10% in FY 2008-09. Sony Ericsson slipped to third position this year with its market share coming down to 6%.

However, inspite of recession, India clearly has the single fastest growing mobile phone market in the world. While globally, there was a reduction in the overall handset market size, India offered cheers to the mobile phone industry.

The previous year also saw the emergence of a number of small Indian brands like Ray, Zen, etc, most of which are selling the Chinese handsets branded as Indians. Most of these are being launched by Indian distributors or resellers and are targeted towards tier-2 cities. These phones are also eating into the market share of the prominent players like Nokia, Motorola, Ericsson, LG, and Samsung. The current year is likely to see more and more brands making an appearance in the Indian market.

The biggest trend of last year was touchscreen, which is evident from the fact that most of the handsets launched last year had this feature. For instance, Samsung introduced four touchscreen mobile phones last year and now has a portfolio of seven such phones. Most of the mobiles being launched now have touchscreen feature in them. LG has three touchscreen phones in the market today, and is getting big on this segment with the target sales up to 6 lakh units and a probable 10% market share in this space alone in the coming six months. Nokia also launched a number of touchscreen products in the market last year.

Market Equations
The year saw the emergence of Samsung as the # 2 player in the market after Nokia. The company strengthened its distribution system at a regional level and appointed Telemart as its national distributor. The company’s Guru series had a successful marketing program with Aamir Khan and established its `Next is What’ positioning. The company also has a special bundling offer for BSNL customers on select handsets.

For Nokia, the biggest success was 5800 XpressMusic. It also unveiled Nokia 6208 classic, a 2.4” QVGA touchscreen which combined an innovative stylus makes that messaging simpler and more fun for the users. E71 was another best-selling music phone from Nokia apart from 5310 XpressMusic.

The company also upgraded its distribution network by increasing its network by 40%. Nokia is now present in 1,90,000 outlets across the country. The company has also expanded its CARE network to over 675 centers across 400 cities.

Apart from that, Nokia is transforming itself from being a pure play handset manufacturer to a solutions and services provider. In this regard, the company has built on its navigation services, which were introduced in 2007 by extending the service to more devices as well as cities. The company’s Maps and Navigation services is available in 149 cities and there are plans to expand them to more cities as well. Nokia N-gage gaming platform also went live in December 2008. The company is also planning to launch Nokia Music Store with local content soon. Moreover, the Ovi Store, which will be a one stop digital window, will go live in India in June 2009. The N97 will be the first Nokia device to come embedded with this feature.

It was clearly the year of smart phones with most of the companies focusing on this segment. With prices plummeting, it was the era of cheap handsets. BlackBerry made huge strides by tying up with most of the service providers as well as dramatically reducing its pricing to cater to the mid-level consumers. The prices have come down from Rs 30,000 to Rs 10,000 and with all the players set to address this segment, the prices are further likely to come down making it affordable for more and more people. This is also in keeping with the plans of the service providers to focus on more data revenue.

There was a sharp decline in the market share of CDMA handsets since Tata Teleservices and Reliance Communications-the two main operators working in this arena-are also moving towards GSM. LG, which was predominantly a CDMA player, is also moving in this direction. The company lost market share in the last fiscal. The company is planning to launch thirty-two new models in the country, six of which will be touchscreen phones. While other models will be 3G-enabled, some of these will also be entry level phones.

The company sold 2.4 mn GSM handsets last year and expect 50% increase this year. LG’s institutional sales accounted for 10% of its mobile sales and now it is also reworking its distribution strategy and will be deploying 1,000 additional shop sales executives and will be launching about 1,000 additional shop-in-shop formats in rural and tier-2 cities. The overall channel coverage is at 42% for the company.

Clearly, all handset manufacturers realize that in the time to come, it is the rural segment which is going to provide the growth. Mobile manufacturers have started introducing new products targeted at rural market, where teledensity is 4%. Samsung partnered with Indian Farmers Fertiliser Cooperative to sell its handsets. In the same vein, Nokia and Motorola have partnered with ITC e-Choupal.

Looking Ahead
On the whole, the market will grow and will maintain its growth percentage with most of the growth coming from the rural segment. The industry is likely to grow by 10-15% in the current year.

Enhanced user experience on the touchscreen platform, music and multimedia rich handsets, VAS, mobile applications, Internet connectivity have contributed to the exponential growth of the Indian mobile handset industry. With more launches coupled with innovative features, the mobile handset industry will expand further.

Mobitainment is going to be the driving feature of the industry where the end customer is looking for services beyond the plain VAS and SMS services. The end consumer is also looking at higher storage to keep the information and ease-of-use features. .

The downturn has had an impact on the industry especially on the replacement market with people postponing their decision to purchase a new handset. Considering the potential of the market and the key launches by greenfield operators, this market is likely to revive by the end of the year.

Gagandeep Kaur

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