The Indian handset market continued its growth trajectory last fiscal with the market increasing from 71.8 mn units in 2006-07 to 95.5 mn in FY 2007-08, recording a 33% growth. Of this, GSM technology continued to dominate the market with 50.6 mn in 2006-07 to 68.3 mn in 2007-08, recording 34% growth. In comparison, CDMA managed to increase the market share from 21.2 mn in 2006-07 to 27.3 mn in 2007-08, recording a 28% growth.
Increasing geographies, the replacement market, and innovative features offered in the handsets fueled the growth in this market. This trend is likely to continue in the coming two to three years with handset manufacturers coming out with new and innovative features to add further impetus to the market.
The market size increased from Rs 21,434 crore in 2006-07 to Rs 24,003 crore in 2007-08, recording a growth of 12%. Nokia continued to dominate the market with 62.5% market share, followed by Sony Ericsson with 12.8%. Samsung increased its market share from 5.6% in FY 2006-07 to 6.2% in FY 2007-08. Motorola lost huge market share. Its market share came down from 11.1% in 2006-07 to 5% in 2007-08. LG’s market share dropped substantially from 11% in 2006-07 to 6.2% in 2007-08.
The Indian handset market is witnessing adoption from both ends of the customer spectrum-from a value conscious mass market user to a customer demanding the best features and innovative products. With most urban areas already covered by mobile operators, 40% of new subscribers are coming from rural areas. By 2010, the rural population is likely to touch 800 mn.
According to V&D estimates, of the next 250 mn users as many as 100 mn will be from the rural parts of the country. The next big growth is expected to come from the hinterland, where two-thirds of the country’s 1.17 bn population still live. As of now, rural subscribers account for close to 25% of the total mobile user base in the country. With most service providers targeting the rural segment, this percentage is likely to see a steep rise in the current year.
Last year saw Nokia launching eight new models in the entry-level segment. Spice, on the other hand, created history by launching People’s Phone costing just Rs 800. The handset is a very basic model with no display screen and lacks the SMS function as well. Spice has also launched entry-level affordable color FM phone, S-525, and an entry-level music phone, S-606, with 1GB internal memory.
In the entry-level segment, Samsung launched F250 and J210, which offer strong value proposition to its users with its relevant features and affordable pricing.
Nokia, along with other players like Motorola and LG, is launching cheaper entry-level handsets to cater to this market. Motorola launched four entry-level models in the last financial year. Sometime back, the company had launched Motofone, which is available at Rs 1,650.
To make its products available in smaller towns, Motorola has entered into alliances with ITC e-Choupal, DSCL Haryali stores, Mobile ME, Kishan Bazar, and Godrej Adhar. Motorola has also tied up with GE Money to provide easy loans to handset buyers at 0% interest rates. Though Motorola has recorded a dip in its sales, its average selling price (ASP) has increased due to sales of MotoQ/HNI models.
Monochrome handsets, however, witnessed a drastic decrease in market share last year. The entry-level color phone is fast replacing this position. Many firms have totally stopped the production of monochrome handsets. Almost 16% of the market is monochrome and the rest is color.
A new player in the industry was Intex, which launched three lightweight GSM mobile phones-Aura, Infi, and King. The company launched products only in selected markets in North India through distributors. Intex recorded a turnover of Rs 15 crore, which is likely to increase by the end of this fiscal.
The Other End
On the other end of the spectrum are hi-end handsets with innovative features and value add-ons.
Nokia launched six phones in its Nseries in the last one year-N95, N92, N77, N76, N81 and N82. In the premier segment, the company launched E90 Communicator, E61i, E65, E51, Nokia 6500 Classic, Nokia 5610, Nokia 5310, Nokia 8800 Sapphire Arte, Nokia 7900 Prism, and Nokia 7900 Prism.
Sony, on the other hand, introduced fifteen handsets across various categories. The company also launched a new series: Emotive, represented by S500i and T650i. In the Walkman series, the company launched W200i, W580i, W960i, and W910i. While W580i comes with a shake control feature and pedometer, W910i comes with a 2GB memory card and SenseMe feature.
In the multimedia phone range, Samsung launched i450, which seeks to give users a mobile theatre experience and G800, which the company claims is the world’s first 5 megapixel camera phone with 3x optical zoom. In the business segment, the company launched Samsung i550 and D880, which are powered by Symbian S60 operating system to address the needs of the business consumer.
Besides, LG launched its much-hyped Viewty, which is the company’s one of the top three best-selling models. Priced at Rs 21,900, Viewty is 3G-enabled and is a color-plus-camera phone.
Once the 3G market opens up, the handset market will further boom. Most handset manufacturers are waiting for the government to clear spectrum issues. Currently, 3G handsets are available to customers only in the premium range. This is likely to change once the market opens up and more players launch their products in this range. LG’s KS20 and KU990 (Viewty) models are 3G compatible. Nokia, Samsung, and other players are also likely to launch 3G handsets in the country once the market opens up.
A significant development last year was the launch of Nokia’s services brand, Ovi. An Internet services brand, Ovi endeavors to become a destination where people can link to all of their existing Web communities, feeds and content.
There is also a definite trend toward GSM. For instance, LG is also moving toward GSM handsets. The company recorded a dip in its market share in the CDMA segment as its market share came down to 24% last year from 42% in FY 2006-07. The main reason for this is that the company discontinued its monochrome CDMA models.
This year, LG plans to almost double its market share from 24% last fiscal to 50%. Offering low-end color handsets and more products to address the mid-end and hi-end segment is the strategy. Huawei, a Chinese brand that also has a small division manufacturing primarily CDMA handsets for bundling for operators, is also planning to focus on GSM.
Handsets are no longer used just for receiving and making calls. There is a definite movement toward more features and technologies being introduced in phones. Advanced technologies related to music, imaging, business needs, and functionalities like GPS are being incorporated at increasingly affordable price points. In terms of usage patterns, music emerged as a key driver across youth and young adults.
Last year was dominated by music-radio handsets. Taking a cue from market leader Nokia, most handset companies offered music handsets last year.
Mobile navigation is another emerging trend in the market. In the days to come, more people will use mobile phones to search addresses.
According to experts, this year will see a movement toward stylish and personalized handsets. Multimedia features will become a norm in the coming times with more and more players offering multimedia features on mobile phones. Multimedia will further fuel the growth of widescreen handsets.
Another growth driver emerging in the country is the replacement market. Global as well as Indian handset manufacturers are planning to focus on the more lucrative replacement market in the country. This has resulted in an increased sale of middle- and high-end phones. A few years ago, the sale of middle- and high-end phones was in the range of 8-10% of the mobile handset market. This figure has now increased to around 20%.
Replacement is likely to emerge as a major trend as a result of more innovations and better models. LG, Nokia, Samsung, Meridian, and Haier are planning to target this growing segment. According to V&D estimates, the replacement market was estimated to be around a third of the entire market at the end of last fiscal.
Companies are targeting younger clients for the replacement market since they change handsets very frequently. The replacement market is likely to emerge as a substantial revenue contributor to companies.
A major development last year in smart phones was the Indian government requesting for access to encryption codes that would let it check emails from users of Blackberry-enabled phones in the country. The main reason for this was the security concerns.
A leader in offering portable Internet access, Blackberry is estimated to have a little more than a lakh users in India. Worldwide, the company has 14 mn subscribers. Once the issue with the Indian government is resolved, Blackberry is likely to see a substantial increase in its subscriber base in India.
The coming year will also see the launch of the much-awaited iPhone in the country. Vodafone recently announced a deal with Apple to offer iPhone on its network in India. The base price for iPhone in India is expected to be around Rs 25,000. iPhone combines Apple’s iPod music player, and video player.
The current year is likely to see convergence of voice, data, and video happening. The market will also move toward the handset replacing the personal computer. The prospects for the handset segment are bright and sunny with the rural segment and replacement driving the market.
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