Davids hitting Goliaths in mobile handset market

With over 700 million mobile subscribers in the country, the battle for the Indian handset market is hotting up

Nokia, Samsung, LG losing ground to Micromax, G'Five, Lava

BY Durba Ghosh
Delhi

Mobile handset manufacturing giants are bleeding. The churn in the Indian mobile handset market has left market leaders Nokia and Samsung losing their grip over the market. Finnish handset maker Nokia's market share slid to 31.5 per cent from over 50 per cent in 2008, while South Korean Samsung's market share came down to 17 per cent in 2010 and is replaced by little known Chinese brand G'Five at the No 2 spot, according to market research agency IDC.

"The market is huge for low-cost handsets and now small brands like G'Five have also started marketing," Kunal Bajaj, director (India), Analysys Mason, said. "Although they cannot match the market share of Nokia, smaller brands are gradually grabbing a significant share."

With over 700 million mobile subscribers in the country, the battle for the Indian handset market is hotting up. Small mobile manufacturers are aggressively taking on global brands with cheaper, feature-rich products to increase their market share.

Once an undisputed leader, Nokia's rough time seems unending. It is struggling to respond to the appeal of Apple Inc's iPhone and the usefulness of Research In Motion's BlackBerry in the global smartphone market. As if this was not enough, strong competition from a slew of domestic brands such as Micromax, Karbonn and Lemon Mobile in the entry-level market are giving the Finnish company a run for its money in the domestic market.

According to IDC, homegrown mobile handset makers captured a 17.5 per cent share of the 100-million (units) handset market at the end of 2009. They started off with less than 1 per cent share in March 2008.

The number of local handset makers in India grew to 28 from five during the past one year alone. Leading the pack is Gurgaon-based Micromax, which grabbed close to 5 per cent of the market in 2009 to become the fourth largest handset seller after Nokia, Samsung and LG. Focusing on ground research, these handset makers have been able to crack the population that is hungry for feature-rich handheld devices at a price about 40 per cent lower than a Nokia or a Samsung. These companies have research and development teams in place to gauge demands and trends.

Indian consumer is spoilt for choice today. A glance would show the plethora of options available in the market. Spice Mobility launched its first 3D mobile phone with dual SIM for Rs 4,299. Intex has a video chat phone with dual camera for Rs 2,990. The company also launched a projector-integrated mobile phone at Rs 13,000. It also launched an application store -- Intex Zone -- on the lines of iPhone's App store. Maxx introduced an Android-based phone with an 8GB memory card priced at Rs 6,999.

With such low price points, a majority of the population is buying cheaper handsets for the freedom to upgrade to a new phone. These domestic companies have managed to attract consumer attention away from the likes of Nokia, Sony Ericsson and Samsung.

"For us it is about variety. Mobiles have become a commodity product and since we offer good features at low cost, people opt for our product. I am confident we can grab more market share," said Vikas Jain, business director, Micromax.

While Micromax targeted the low-cost smartphone segment, Lava Mobiles targeted users who were not comfortable with the Qwerty keypad. The company launched the Alpha keypad that arranges the keys in alphabetical order. Co-founder and director of Lava Mobiles SN Rai said, "Our unique selling proposition is our innovation. We take up research and launch products according to consumer needs."

Lava has until now sold over 100,000 Alpha keypad handsets costing around Rs 4,300. The company has also addressed the country's multi-language factor by launching multilingual handset Lava KKT 15 that comes pre-loaded with 12 Indian languages -- Hindi, Marathi, Bengali, Tamil, Punjabi, Telugu, Gujarati, Kannada, Urdu, Malayalam, Oriya, and Assamese. Priced at Rs 2,899, these phones allow the rural and semi-urban users to communicate in local languages.

Bajaj of Analysys Mason said there is a market for low-cost handsets in both rural and urban India. Rai added that the cost and language factor is the winning combination.

"We have scored more in rural areas, since that market was, until now, unaddressed. The bigger players were majorly urban-centric. But we have seen significant demand for low-cost handsets with good features in urban areas also," Rai said.

Lava Mobiles now plans to launch 3G and Android phones below the Rs 8,000 mark to cash in on the mobile broadband craze. According to a study by market research firm Nielsen Company, among the urban subscribers who intend to take up 3G or third-generation services, 63 per cent plan to upgrade their handsets. This presents a huge opportunity for new handset makers.

Apart from differentiating on features, these handset makers are also ramping up their after-sales services. Lemon Mobiles is ramping up service centres from 400 to 450 in the next two months and mulling a production facility in Noida to control handset costs. The company has also introduced a dual-camera phone to cater to video calling demand of consumers.

London-based INQ Mobile feels that it's the right time for India's 3G entry. Jeff Taylor, co-founder, INQ Mobiles, said that India is a different market in terms of choice of handsets, competition and price sensitivity.

The company currently has two handsets in the Indian market; both are 3G-enabled. It wants to have not more than five handsets in its portfolio, on the lines of the BlackBerry and iPhone. However, the company will continue to be in the mid-price segment of below Rs 8,000.

"Nokia has also come up with a number of low-cost models but they are relatively sparse on features. This matrix of price and good features has been addressed by the domestic brands," said Naveen Mishra, senior research manager at IDC.

But the common threat to both giants and small handset makers is the grey market. "Handsets in the grey market have taken up a huge share," said Pankaj Mahindroo, president, Indian Cellular Association. "Although they are low on cost, they are not reliable, but still, since it is easy to dispose of, people go for it. These are the makers who do not pay any taxes," he added.

Global brands account for more than $40 million of the total market, while Indian brands consist about $15 million. The grey market handsets are at par with the market value of Indian brands, according to Mahindroo. "Although Nokia and Samsung together still account for majority of the market, the grey market has grabbed a significant share," he said.