Mobile Handset Market in India: Current Scenario & Future Prospects
The Indian mobile handset arena, at present, appears fully packed with numerous options to look at, with models varying from the cheapest across the world, the Vodafone 150 (VF 150) sold for INR 799 (USD 18) featuring only the basic attributes of a cell phone, to the likes of iPhone that feature some of the most sophisticated technologies. At the first look, this reflects the focus the domestic market is receiving from some of the world’s leading handset players such as Nokia, Samsung, Sony Ericsson and Motorola, which are betting high on the fast-growing demand for mobile handsets across the country. The same understanding has exactly been the trigger behind the flood of new handsets launched in the past couple of years, as players struggle to capture a larger pie of this hot cake.
Taking a look back to the past decade, when owning a handset symbolized a high status among people, the Indian cellphone market has come up very strong, riding on the wave of rising wireless subscriber base, which recently crossed 600 million mark in mid 2010, and consistent decline in the Average Selling Price (ASP) of handsets, which has come down to INR 2500 (USD 50) in 2010. A few other key factors known to have contributed to this phenomenal growth are rising disposable incomes, affordable SIM registration and airtime charges. All these factors have assisted in owning a handset increasingly affordable to masses in the past 10 years. Additionally, with the rapid advancements in the technological field, the introduction of innovative features with sophisticated technologies that have potential to live up to the customers’ growing expectations has become more of an industry norm and a challenge for existing players to survive in the market.
Understanding the growing appetite of Indian consumers, a large number of local players such as Micromax, Spice, LAVA, and Lemon have jumped into reap profits on the back of local advantage such as relatively better consumer understanding. And, to everyone’s surprise, these players have also been successful in their drive as they now enjoy a huge share in the domestic handset market. While the leader, Nokia is way above other players, in terms of market share (volume), accounting for more than 50% of the domestic handset sales, the new players have miraculously grabbed approximately 14% share of the overall market, as per the industry figures.
These are the companies which seem to have hit a jackpot in the domestic market in terms of volume sales, as they now jointly stand at the 3rd spot in the Indian handset market, right behind the market leader Nokia, and Samsung. The level of achievement for these players seems way higher when one comes to know that almost all the global handset manufacturers are already present in the market. A key point which has enabled these players to grow so fast is the level of innovation they have brought into the market, something which seems to have forced even the leaders to follow. The trend is validated by the recent launch of dual-SIM handsets by domestic leader NOKIA. It were these local players, which introduced such innovative and value-added features in mobiles, as the one with nearly 30 days of battery back-up, and dual SIM card options.
Presently sprinting on a high speed track, the Indian handset market is poised to touch record levels by 2015 in terms of volume sales. A major sales growth is expected to come on the back of rising disposable incomes, growing demand for innovative features, applications, and offerings such as the ones recently introduced by local players Micromax, KARBONN, and LAVA.
The mobile handset teledensity (handsets per 100 inhabitants) in India currently stands at nearly 45%, representing a huge untapped market, especially the rural sector. The industry leader, Nokia seems to have felt the market pulse as, during the period 2009-10, the company introduced more than 20 devices through a vast distribution network of 200,000 retail outlets, out of which nearly 45% were based in rural areas. Moreover, with the urban markets touching saturation levels, the focus is bound to shift towards rural sector, where customers are highly price sensitive and most of the purchase decisions are taken on the POS (point of sale) only. Additionally, in the rural sector, sales are primarily driven by factors such as easy affordability, quality, and at times easy-to-use features.
The introduction of 3G services is expected to be another crucial growth driver in the domestic market as it is expected to push demand for high-end handsets to new highs, especially for the ones with 3G feature. This would certainly work in favour of handset manufacturers which are increasingly strained by the ever declining handset ASP. The forecast is validated by the huge interest received from mobile network operators during the recently completed auction of 3G licenses, reportedly generating a whopping INR 650 million for the government, as operators realise the untapped potential of these services across the country. However, in contrast to the global counterparts, India, though being a developing nation, lags way behind many developed nations, such as South Korea, Japan, and the US, where 3G entered almost at the start of the 21st century. That’s one of the reasons India offers a lot of potential for global handset manufacturers in terms of both new and replacement handset sales, compared to the developed economies where mobile teledensity ranges between 90%-100% and hence offer less scope for new handsets.
Hence, it can be inferred that as the country enters the 2nd era of revolution in mobile handset market, where focus shifts from mere owning a cellphone with limited features to the one featuring all the advanced capabilities, such as QWERTY keypad, 3G, and high quality camera, the high-end models, especially the smart phones, are expected to witness a steep growth curve through 2015. On the other hand, despite the estimated growth in demand for high-end handsets, it would not be illogical to forecast that the low-cost handsets would still account for a majority share in the handset market in terms of volume sales, considering the fact that this category continues to witness consistent decline in ASP, as majority of the new players are targeting this category with innovative offerings.