1

Managing Marketing Programs

Pricing Strategies- Mobile Phone Industry

By Parvez Rangwalla

Email-ID pryprvgmailcom

Welingkar Institute of Management Development

amp Research Bangalore

2

Topics Covered

Topic Page No

1 History and growth of mobile phone industry in India 3

2 Current scenario of Mobile phone industry 4

3 Marketing strategies of Major players- Nokia and Samsung 7

4 Pricing Strategies in Mobile Phone Industry 12

5 Current trend in mobile industry 17

6 Future of mobile industry (RURAL) 20

7 References 22

3

1 History and growth of mobile phone industry in India

The real transformation came in the scenario of Indian telecom industry after

announcement of National telecom policy in 1994 The mobile services were

commercially launched in India in August 1995 In the initial 5ndash6 years the average

monthly subscribers additions were around 005 to 01 million only and the total

mobile subscribers base in December 2002 stood at 105 millions However after

the number of proactive initiatives taken by regulator and licensor the monthly

mobile subscriber additions increased to around 2 million per month in the year

2003-04 and 2004-05 In the last few years there has been a huge exponential

growth with addition of about 10 to 15 million subscribers per month to customer

base

In the initial days of mobile phone in India in mid 1990‟s the grey market accounted

for 80 per cent of the mobile phone sales due to a huge price differential between the

legally imported and the grey market phones

Even as the government slashed the duties at the same time various mobile

manufacturers reduced their rates to induce the customers to buy a phone from

authorized phone shop Today the grey market comprises very small share of

market

When mobile phones were introduced in India in the mid-90s US based Motorola

Swedens Ericsson and Finlands Nokia dominated the handset market in India Over

the years the old order has changed today players like Samsung LG Apple Virgin

HTC Huawei Haier are all competing for a place in the market Apart from this there

is also a competition from imported unbranded Chinese mobiles which are avaible

with lot many features of a typically high end say Nokia mobile but at a substantially

lesser price

After the initial dominance of Nokia from 1990‟s till 2002 a change occurred in Indian

market hen CDMA technology was launched in the year 2003 At this point the

Korean brands namely Samsung and LG established themselves after they tied up

with CDMA operator Reliance Infocomm This was a breakthrough in India‟s mobile

phone industry since people were able to get mobile phones with Reliance

connection only for a initial cost of about Rs 500- This opened up a mass market

for mobile manufacturers in India

Gradually all the major players like Nokia Motorola came up with their CDMA

models and have been able to regain their market share

4

In the last few years India has witnessed a revolution in mobile phone market with

about 8 to 10 million subscribers being added to the customer base each month The

major reasons for this boom have been

1 Falling tariff rates of telecom service providers

2 Fall in the prices of mobile handsets

3 Increase in the reach of service providers covering ever nook and corner of

the country

2 Current scenario of Mobile phone industry

Following are the highlights of mobile phone industry in India as on December 2009

1 The penetration of mobile phones stands at about 30

2 81 of mobile users are in urban area

3 India‟s rural teledensity stands at about 126

4 India has about 517 million subscribers by December 2009

5 It is forecasted that sales of mobile handsets in rural India will grow at CAGR

of around 17 from 2009 to 2012

Above figures clearly indicate that although mobile phones might have made

significant inroads into the urban market amp urban market may start moving towards

saturation but still lot of potential is to be explored in the rural segment

Market Share of different Manufacturers as on Dec-2009 is given below

As evident from above figures Nokia is a major player in the Indian mobile industry

today

5

Also to understand the satisfaction level which users of above brands express we

look at a consumer satisfaction survey the results of which are shown below The

survey was done on Indian Urban mobile phone users with Sample size of N=5775

The source of this data is website wwwvitalanalyticsin

Model Users Likely to

recommend

LG 576

Motorola 410

Nokia 686

Samsung 557

Sony-Ericsson 653

The result shows Nokia users are the most satisfied with their product followed by

Sony-Ericsson and LG

The results of above survey are important since mobile phone is a device which is

frequently replaced in few years time so the brand which provides maximum

satisfaction to users will be able to maintain high loyalty and hence maintain its

market share

A segregation of Indian market on the basis of price bands is shown below We can

see that mobile phones are avaible in various price bands from Rs 2000- amp less up

to Rs 50000-

3

1 History and growth of mobile phone industry in India

The real transformation came in the scenario of Indian telecom industry after

announcement of National telecom policy in 1994 The mobile services were

commercially launched in India in August 1995 In the initial 5ndash6 years the average

monthly subscribers additions were around 005 to 01 million only and the total

mobile subscribers base in December 2002 stood at 105 millions However after

the number of proactive initiatives taken by regulator and licensor the monthly

mobile subscriber additions increased to around 2 million per month in the year

2003-04 and 2004-05 In the last few years there has been a huge exponential

growth with addition of about 10 to 15 million subscribers per month to customer

base

In the initial days of mobile phone in India in mid 1990‟s the grey market accounted

for 80 per cent of the mobile phone sales due to a huge price differential between the

legally imported and the grey market phones

Even as the government slashed the duties at the same time various mobile

manufacturers reduced their rates to induce the customers to buy a phone from

authorized phone shop Today the grey market comprises very small share of

market

When mobile phones were introduced in India in the mid-90s US based Motorola

Swedens Ericsson and Finlands Nokia dominated the handset market in India Over

the years the old order has changed today players like Samsung LG Apple Virgin

HTC Huawei Haier are all competing for a place in the market Apart from this there

is also a competition from imported unbranded Chinese mobiles which are avaible

with lot many features of a typically high end say Nokia mobile but at a substantially

lesser price

After the initial dominance of Nokia from 1990‟s till 2002 a change occurred in Indian

market hen CDMA technology was launched in the year 2003 At this point the

Korean brands namely Samsung and LG established themselves after they tied up

with CDMA operator Reliance Infocomm This was a breakthrough in India‟s mobile

phone industry since people were able to get mobile phones with Reliance

connection only for a initial cost of about Rs 500- This opened up a mass market

for mobile manufacturers in India

Gradually all the major players like Nokia Motorola came up with their CDMA

models and have been able to regain their market share

4

In the last few years India has witnessed a revolution in mobile phone market with

about 8 to 10 million subscribers being added to the customer base each month The

major reasons for this boom have been

1 Falling tariff rates of telecom service providers

2 Fall in the prices of mobile handsets

3 Increase in the reach of service providers covering ever nook and corner of

the country

2 Current scenario of Mobile phone industry

Following are the highlights of mobile phone industry in India as on December 2009

1 The penetration of mobile phones stands at about 30

2 81 of mobile users are in urban area

3 India‟s rural teledensity stands at about 126

4 India has about 517 million subscribers by December 2009

5 It is forecasted that sales of mobile handsets in rural India will grow at CAGR

of around 17 from 2009 to 2012

Above figures clearly indicate that although mobile phones might have made

significant inroads into the urban market amp urban market may start moving towards

saturation but still lot of potential is to be explored in the rural segment

Market Share of different Manufacturers as on Dec-2009 is given below

As evident from above figures Nokia is a major player in the Indian mobile industry

today

5

Also to understand the satisfaction level which users of above brands express we

look at a consumer satisfaction survey the results of which are shown below The

survey was done on Indian Urban mobile phone users with Sample size of N=5775

The source of this data is website wwwvitalanalyticsin

Model Users Likely to

recommend

LG 576

Motorola 410

Nokia 686

Samsung 557

Sony-Ericsson 653

The result shows Nokia users are the most satisfied with their product followed by

Sony-Ericsson and LG

The results of above survey are important since mobile phone is a device which is

frequently replaced in few years time so the brand which provides maximum

satisfaction to users will be able to maintain high loyalty and hence maintain its

market share

A segregation of Indian market on the basis of price bands is shown below We can

see that mobile phones are avaible in various price bands from Rs 2000- amp less up

to Rs 50000-

4

In the last few years India has witnessed a revolution in mobile phone market with

about 8 to 10 million subscribers being added to the customer base each month The

major reasons for this boom have been

1 Falling tariff rates of telecom service providers

2 Fall in the prices of mobile handsets

3 Increase in the reach of service providers covering ever nook and corner of

the country

2 Current scenario of Mobile phone industry

Following are the highlights of mobile phone industry in India as on December 2009

1 The penetration of mobile phones stands at about 30

2 81 of mobile users are in urban area

3 India‟s rural teledensity stands at about 126

4 India has about 517 million subscribers by December 2009

5 It is forecasted that sales of mobile handsets in rural India will grow at CAGR

of around 17 from 2009 to 2012

Above figures clearly indicate that although mobile phones might have made

significant inroads into the urban market amp urban market may start moving towards

saturation but still lot of potential is to be explored in the rural segment

Market Share of different Manufacturers as on Dec-2009 is given below

As evident from above figures Nokia is a major player in the Indian mobile industry

today

5

Also to understand the satisfaction level which users of above brands express we

look at a consumer satisfaction survey the results of which are shown below The

survey was done on Indian Urban mobile phone users with Sample size of N=5775

The source of this data is website wwwvitalanalyticsin

Model Users Likely to

recommend

LG 576

Motorola 410

Nokia 686

Samsung 557

Sony-Ericsson 653

The result shows Nokia users are the most satisfied with their product followed by

Sony-Ericsson and LG

The results of above survey are important since mobile phone is a device which is

frequently replaced in few years time so the brand which provides maximum

satisfaction to users will be able to maintain high loyalty and hence maintain its

market share

A segregation of Indian market on the basis of price bands is shown below We can

see that mobile phones are avaible in various price bands from Rs 2000- amp less up

to Rs 50000-

5

Also to understand the satisfaction level which users of above brands express we

look at a consumer satisfaction survey the results of which are shown below The

survey was done on Indian Urban mobile phone users with Sample size of N=5775

The source of this data is website wwwvitalanalyticsin

Model Users Likely to

recommend

LG 576

Motorola 410

Nokia 686

Samsung 557

Sony-Ericsson 653

The result shows Nokia users are the most satisfied with their product followed by

Sony-Ericsson and LG

The results of above survey are important since mobile phone is a device which is

frequently replaced in few years time so the brand which provides maximum

satisfaction to users will be able to maintain high loyalty and hence maintain its

market share

A segregation of Indian market on the basis of price bands is shown below We can

see that mobile phones are avaible in various price bands from Rs 2000- amp less up

to Rs 50000-

6

Source httpwwwfonearenacommobile_phone_pricelisthtml

A close study of the product offered by various companies reveals following

1 Companies like HTC Apple Vertu have products only for the high end market

of Rs 15000- and more

2 On the other hand there are players like Usha lexus whose product fall in the

lower category with their products being avaible in price range of minimum of

Rs 1900- to maximum Rs 5900- Also Virgin mobile Huawei etc fall in the

same category

3 Players like Onida have mobiles in lower prices (Rs 2000-) to middle price

range (till Rs9900-)

4 Players like Motorola Nokia LG Sony Ericsson have mobile phones avaible

in all different price range and hence are able to target all the different

segments of the market

7

3 Marketing Strategy A holistic view (Nokia Samsung)

Nokia

Nokia as a manufacture of mobile communication devices was succeeded in

administrating marketing strategies in India markets The reason is that Nokia

delivers better products which cater to the needs and preferences of Indian

consumers

Nokia - Made in India ndash A detailed analysis

In April 2005 Nokia India a subsidiary of Finland-based Nokia announced that

it was setting up a manufacturing facility for mobile devices in Chennai the state

capital of Tamil Nadu in southern India Nokia planned to invest US$ 100-150 million

in the facility where the production was expected to begin in the first half of 2006

Pekka Ala-Pietilauml President and Head of Customer amp Market Operations Nokia

Corporation said ldquoEstablishing a new factory in India is an important step in the

continuous development of our global manufacturing networkrdquo4 India was ideal for

Nokias new production facility Each mobile handset has more than 400 parts and

the average production capacity of each manufacturing unit of Nokia is around 20

million units

This level of manufacturing involves a total of 8 billion components per annum

requiring strong logistical support Nokias manufacturing facility needed to be

located close to a major international airport or sea port for quick supply of

components India met all these requirements and also enjoyed cheap manpower

costs and proximity to the rapidly growing Asia Pacific markets

Besides Nokia was the market leader in mobile communication devices in India

The company has been carrying out sales amp marketing customer care and research

amp development activities in the country Nokia considers India to be one of its most

important markets The companys Code Division Multiple Access (CDMA)5 facility is

located in Mumbai and provides software and technical support to CDMA consumers

in India and other Asia Pacific countries In 2004 Nokia was chosen as bdquothe most

respected consumer durables company by Businessworld6 The magazine wrote

ldquoThis Finnish companys debut at the top of the heap says two things

One that its strategies - including ones like developing a phone specifically for

India - are respected But more importantly Nokias win is also an endorsement of

the importance of the ubiquitous cell phone as a durable in todays world After all

unlike its competitors most of which offer a slew of durables Nokia is mostly a cell

phone companyrdquo

8

In 2005 Nokia was recognized as the bdquoBrand of the Year by the Confederation

of Indian Industry Indias apex industry association The company was chosen for

this award because of its high brand recall well established distribution channels

and being most preferred by the consumers

Enamoured of Nokias success in the Indian market Harvard University had

invited Nokia India to talk on bdquoHow Nokia cracked open the Indian market

About Nokia

Nokia was founded in 1865 by Fredrik Idestam in Finland as a paper

manufacturing company In 1920 Finnish Rubber Works became a part of the

company and later on in 1922 Finnish Cable Works joined them All the three

companies were merged in 1967 to form the Nokia Group

In the late 1970s Nokia started taking an active interest in the power and

electronics businesses and by 1987 consumer electronics became Nokias major

business Nokia created the NMT mobile phone standard in 1981 and launched the

first NMT phone Mobira Cityman in 1987 The company delivered the first GSM

network to Radkilinia a Finnish company in 1991 and in 1992 Nokia 1011 - a

precursor for all Nokias current GSM phones - was introduced

In the 1990s Nokia provided GSM services to 90 operators across the world

Another significant move of the company during this period was the divestment of its

non-core operations like IT The company focused on two core businesses - mobile

phones and telecommunications networks Between 1992 and 1996 the company

exited from the rubber and cable businesses as well

Nokia entered the Indian market in 1994 The first ever GSM call in India was

made on a Nokia 2110 mobile phone on its own network in 1995 When Nokia

entered India the telecom policies were not conducive to the growth of the mobile

phone industry

The tariffs levied on importing mobile phones were as high as 27 usage

charges were at Rs16 per minute and at these high rates consumers did not take

to mobile phones Nokia also had to face tough competition from other powerful

global players like Motorola Sony Siemens and Ericsson

Nokia was quick to learn from its mistakes and adopted strategies to regain its

lost market share Globally during the first quarter of 2005 the companys sales

reached 74 billion euros with the company selling 54 million phones during the

period In India Nokia continued its leadership in GSM with a market share of 74 in

March 2005 Nokia also surpassed Samsung in color mobiles in the GSM segment

recording a share of 55 in the same month

9

Nokia reorganized itself at the global level in 2004 At this point a multimedia

division was formed

The divisions Indian operations concentrated on promoting the concept of high-

end telephones in smaller towns while going in for higher volumes in larger cities

The marketing division of the company concentrated on making distributors in small

towns sell high-end products Though the distributors were skeptical to start with by

the end of 2004 the process was streamlined and the results started to show

The Future Prospects

According to industry analysts by 2010 the mobile phones industry in India will be

driven by voice multimedia and mobile services for organizations The teledensity in

India was estimated to increase to 182 by March 2009 with mobile subscription

rising to 14877 million by that time In many instances the cell phone has become

the only basic telephone link of a householdenterprise in India rather than a landline

phone It was turning out to be more economical and efficient than fixed line

telephones So there was great scope for further expansion with reduction in the

cost of ownership

Samsungs Strategy to Gain Market Share in The Indian Mobile Phone Market

The Samsung management has initiated a market-mapping exercise to get into our

fold distributors who have relevant knowledge of the market credibility a good

distribution network and will therefore contribute in strengthening Samsungs reach in

the market the new distribution strategy would take its penetration level in the

market from the current 55 percent to 85 percent by the end of the year

On the retail front it was taking initiatives to increase the number of retailers

enrolled as Samsung Mobile Privilege Partners (SMPPs) from around 100 in 2007 to

around 400 by the end of the year Single and multi-brand retailers had shown an

interest in becoming SMPP

In the same month the company launched five new mobile phone models and said

that it would launch another 13 by the middle of the year The models that were

launched included multimedia phones phones for corporate customers and a

comparatively lower priced model aimed at a bigger chunk of the market

The company as of early 2008 its mobile phones were priced between Rs 1700

and Rs 28000 but that the company would launch more expensive mobile phones

in the future

The company also announced its new positioning with the new pay-off line Next is

10

What and that it had roped in a leading actor of the Indian film industry Aamir Khan

(Aamir) as its brand ambassador Aamir would also feature in its new ads

Announcing the major celebrity endorsement for the brand HB Lee president and

CEO Samsung (South-West Asia) said The Samsung brand stands for qualities of

innovation change discovery self-expression and excellence in performance And

these very same qualities are epitomized by Aamir Khan whose quality and depth of

work as well as versatility as an actor have made him a much loved and respected

actor in India today We are indeed very proud and privileged to have him as our

brand ambassador

With Aamirs endorsement of Samsung the fight for the mobile phone market had

also become a four-way battle with other leading actors endorsing the rival brands -

Shah Rukh Khan endorsing Nokia Abhishek Bachchan endorsing Motorola and

Hrithik Roshan endorsing Sony Ericsson

According to Samsung the mobile phone market in India would be 100 million units

in 2008-09With all these new initiatives Samsung was confident of achieving its

objective of cornering a 15 percent market share in the country

The company said that it had the necessary infrastructure to ramp up its production

capacity at its manufacturing unit at Noida from the current 6 million units per annum

depending on the demand

Recently to have an impact on international prospective mobile phone users

Samsung has signed up Didier Drogba playing in Chelsea Football Club as its

2008 Mobile Phone category brand ambassador

As part of this partnership Drogba will appear in Samsung Mobile adverting

campaigns for a period of one year and will also make public appearances to

promote Samsung‟s products and corporate activities

ldquoExtending our association with Chelsea FC we are now thrilled to partner with

Drogba as Samsung‟s brand ambassadorrdquo says Chi Won Suh CEO

Samsung Middle East and Africa region ldquoAfrica is a key market for Samsung

Electronics with immense growth potential and we are confident that our

association with an internationally and locally acclaimed football star like Drogba

will bring us closer to the football loving population throughout the African

continentrdquo

Football sponsorship is one of the pillars of Samsung‟s sports marketing strategy It

is derived from the belief that sport especially football unites people of all ages

9

Nokia reorganized itself at the global level in 2004 At this point a multimedia

division was formed

The divisions Indian operations concentrated on promoting the concept of high-

end telephones in smaller towns while going in for higher volumes in larger cities

The marketing division of the company concentrated on making distributors in small

towns sell high-end products Though the distributors were skeptical to start with by

the end of 2004 the process was streamlined and the results started to show

The Future Prospects

According to industry analysts by 2010 the mobile phones industry in India will be

driven by voice multimedia and mobile services for organizations The teledensity in

India was estimated to increase to 182 by March 2009 with mobile subscription

rising to 14877 million by that time In many instances the cell phone has become

the only basic telephone link of a householdenterprise in India rather than a landline

phone It was turning out to be more economical and efficient than fixed line

telephones So there was great scope for further expansion with reduction in the

cost of ownership

Samsungs Strategy to Gain Market Share in The Indian Mobile Phone Market

The Samsung management has initiated a market-mapping exercise to get into our

fold distributors who have relevant knowledge of the market credibility a good

distribution network and will therefore contribute in strengthening Samsungs reach in

the market the new distribution strategy would take its penetration level in the

market from the current 55 percent to 85 percent by the end of the year

On the retail front it was taking initiatives to increase the number of retailers

enrolled as Samsung Mobile Privilege Partners (SMPPs) from around 100 in 2007 to

around 400 by the end of the year Single and multi-brand retailers had shown an

interest in becoming SMPP

In the same month the company launched five new mobile phone models and said

that it would launch another 13 by the middle of the year The models that were

launched included multimedia phones phones for corporate customers and a

comparatively lower priced model aimed at a bigger chunk of the market

The company as of early 2008 its mobile phones were priced between Rs 1700

and Rs 28000 but that the company would launch more expensive mobile phones

in the future

The company also announced its new positioning with the new pay-off line Next is

10

What and that it had roped in a leading actor of the Indian film industry Aamir Khan

(Aamir) as its brand ambassador Aamir would also feature in its new ads

Announcing the major celebrity endorsement for the brand HB Lee president and

CEO Samsung (South-West Asia) said The Samsung brand stands for qualities of

innovation change discovery self-expression and excellence in performance And

these very same qualities are epitomized by Aamir Khan whose quality and depth of

work as well as versatility as an actor have made him a much loved and respected

actor in India today We are indeed very proud and privileged to have him as our

brand ambassador

With Aamirs endorsement of Samsung the fight for the mobile phone market had

also become a four-way battle with other leading actors endorsing the rival brands -

Shah Rukh Khan endorsing Nokia Abhishek Bachchan endorsing Motorola and

Hrithik Roshan endorsing Sony Ericsson

According to Samsung the mobile phone market in India would be 100 million units

in 2008-09With all these new initiatives Samsung was confident of achieving its

objective of cornering a 15 percent market share in the country

The company said that it had the necessary infrastructure to ramp up its production

capacity at its manufacturing unit at Noida from the current 6 million units per annum

depending on the demand

Recently to have an impact on international prospective mobile phone users

Samsung has signed up Didier Drogba playing in Chelsea Football Club as its

2008 Mobile Phone category brand ambassador

As part of this partnership Drogba will appear in Samsung Mobile adverting

campaigns for a period of one year and will also make public appearances to

promote Samsung‟s products and corporate activities

ldquoExtending our association with Chelsea FC we are now thrilled to partner with

Drogba as Samsung‟s brand ambassadorrdquo says Chi Won Suh CEO

Samsung Middle East and Africa region ldquoAfrica is a key market for Samsung

Electronics with immense growth potential and we are confident that our

association with an internationally and locally acclaimed football star like Drogba

will bring us closer to the football loving population throughout the African

continentrdquo

Football sponsorship is one of the pillars of Samsung‟s sports marketing strategy It

is derived from the belief that sport especially football unites people of all ages

10

What and that it had roped in a leading actor of the Indian film industry Aamir Khan

(Aamir) as its brand ambassador Aamir would also feature in its new ads

Announcing the major celebrity endorsement for the brand HB Lee president and

CEO Samsung (South-West Asia) said The Samsung brand stands for qualities of

innovation change discovery self-expression and excellence in performance And

these very same qualities are epitomized by Aamir Khan whose quality and depth of

work as well as versatility as an actor have made him a much loved and respected

actor in India today We are indeed very proud and privileged to have him as our

brand ambassador

With Aamirs endorsement of Samsung the fight for the mobile phone market had

also become a four-way battle with other leading actors endorsing the rival brands -

Shah Rukh Khan endorsing Nokia Abhishek Bachchan endorsing Motorola and

Hrithik Roshan endorsing Sony Ericsson

According to Samsung the mobile phone market in India would be 100 million units

in 2008-09With all these new initiatives Samsung was confident of achieving its

objective of cornering a 15 percent market share in the country

The company said that it had the necessary infrastructure to ramp up its production

capacity at its manufacturing unit at Noida from the current 6 million units per annum

depending on the demand

Recently to have an impact on international prospective mobile phone users

Samsung has signed up Didier Drogba playing in Chelsea Football Club as its

2008 Mobile Phone category brand ambassador

As part of this partnership Drogba will appear in Samsung Mobile adverting

campaigns for a period of one year and will also make public appearances to

promote Samsung‟s products and corporate activities

ldquoExtending our association with Chelsea FC we are now thrilled to partner with

Drogba as Samsung‟s brand ambassadorrdquo says Chi Won Suh CEO

Samsung Middle East and Africa region ldquoAfrica is a key market for Samsung

Electronics with immense growth potential and we are confident that our

association with an internationally and locally acclaimed football star like Drogba

will bring us closer to the football loving population throughout the African

continentrdquo

Football sponsorship is one of the pillars of Samsung‟s sports marketing strategy It

is derived from the belief that sport especially football unites people of all ages

11

genders and races

Samsung bada to rival Android Linux

Samsung entered into the mobile OS arena with bada The software whose name is

based on the Korean for ocean is designed to be open and will compete directly

against rivals like Android or LiMo It will be based on universal standards and wont

consider even core aspects of the OS off-limits developers can not only use

contacts the dialer and other utilities but extend them with new features of their own

Most details are left vague but bada will have a central app store Carriers will also

have the option of customizing the OS to suit their own tastes

Samsung expects the very first device using bada to show in the first half of 2010

along with the initial app store More phones should be ready by the second half of

that year while the app store will expand to 30 different countries including key

countries in Europe A more formal unveiling is due in the UK for December and will

be followed by first looks for developers both in December and in January

The news backs analyst claims of Samsung moving to its own platform and adopting

modern open platforms including bada If fully representative it also signals the

likely ends of Symbian and Windows Mobile at Samsung as the forecast would have

Symbian gone entirely by 2011 and Microsofts OS at just 20 percent by 2012 where

it makes up 80 percent of Samsung phones today Such a gesture will also render

closed platforms like OS X iPhones and Windows Mobile the relative minority in

numbers though not necessarily market share

Recent happenings were the Samsung Corby which is a full-touch handset that

places users at the centre of the social media revolution with full support for a wide

range of social networks The new mobile compliments the Company‟s existing

touch screen strategy ldquotouch for every lifestylerdquo by broadening the market and

targeting the youth audience

The Corby represents a complete makeover for the youth segment with its eye-

catching design which marks a significant break from the way full touch phones are

usually designed The Samsung Corby is notable for both its body design and

colours it comes with bold colour options

With Ghazini swiping the box office Samsung has enchased on its brand

ambassador Amir Khan by launching Ghazini mobile games on selected models

which is a smart and innovative approach of marketing strategy

12

The future prospects of Samsung mobiles doesn‟t seem gloomy with the above

developments and with time to come there would be a tough competition with its

rivals So Next is what

4 Pricing Strategies

1 Penetration Pricing This pricing strategy is followed by companies with the

intention to maximize their market share They believe that a higher sales volume

will lead to lower unit costs amp higher long-run profit

Example China Mobile Phones in India

This is one of the fastest growing industries in India China mobile phones are cheap

and offer the same features as a expensive mobile from some other well known

manufacturers

Rs

12000

China-JN269

Rs

9900

China-MT3300

Rs

9800

China_Elitek_85

02

Rs

9500

China-GT-MD900

Rs

9400

China-6500S

Rs

8700

China_GT_Q71

8

Rs

6137

China-Elitek-

X6019

Rs

5200

China_Elitek_X6

011

Rs

4900

China_ELITEK_X6

010

Rs

4500

China_Elitek_X6

012

A few samples of Chinese mobiles are shown above Only problem that exist for the

Chinese mobile phones is that consumer generally have a low quality perception

associated with them and hence do not trust their quality However they are well

suited to people who want to enjoy features of a high end mobile without having a

budget for the same

2 Predatory Pricing

This pricing strategy is followed with the intention to wipe out the competition

13

Example In the year 2003 LG and Samsung along with Reliance came up with

Rs 500- mobile scheme where both handsets along with connections were

available for Rs 500- This was something which revolutionized the mobile

phone and telecom industry

3 Perceived value Pricing

In this case the pricing is done based on the customer‟s perception about the

company and its product Perceived value is made up of several elements such

as buyer‟s image of product performance the channel deliverables warranty

quality and even softer attributes such as supplier‟s reputation

Example A good example for this kind of pricing is Apple iPhones They are offered

in price range of Rs 31000- to Rs 42500-

Their price is set based on image of brand apple amp customer affinity towards it

Comparable mobiles phones from other manufacturers like Sony Ericson Nokia are

offered at relatively cheaper price For example comparable N series mobiles from

Nokia are offered at prices below Rs 30000- (Except for Nokia- N9 amp Nokia-8800

Carbon) Also SONYERICSSON ndash Satio is offered for Rs 31000- amp all other Sony

brands are available for prices below it

Apple can set higher prices since it feels that its customers will be ready to pay for it

based on its perceived value

14

Apple-iPhone-3G-S-32GB Price | Rate Rs 42500-

4 Value Pricing This is pricing strategy in which a company wins loyal customers

by charging a fairly low price for a high quality offering

Example Nokia E 63 Mobile

This mobile is priced at Rs 11260- This mobile offers a large number of high end

applications like Web-Browsing Email Data Network GPRS GPS amp Navigation

and lots of other facilities apart from serving the basic mobile functions At the same

time it has a sleek body amp robust structure

A image of this mobile has been shown below

15

5 Product form pricing Different versions of the same product are priced

differently

Examples Nokia-5000 is priced at Rs 4300- Whereas Nokia-7210C-Supernova is

priced at Rs 4800- offers almost the same features The reason for difference in

pricing is due to the sleek structure of Nokia-7210C

16

6 Promotional Pricing

1 Special Event Pricing In this case special prices are offered during special

occasions like festivals to increase the sales Example Last Diwali (September 2009) Samsung offered discounts on

Samsung Omnia mobile phone Their market price at that time was Rs

33990- whereas their discounted price for Diwali was Rs Rs 31990-

2 Low-Interest financing

Company can offer low interest financing to customer This will reduce the

burden of initial cost to the customer

Example In 2009 Nokia piloted a scheme in two Indian states where it sold

handsets on a weekly instalment of 100 rupees ($2) over 25 weeks period

3 Psychological Discounting

This is done to make the customer believe that product is priced cheaply or

some cases just break the price barrier that customer has in his mind like

price at price Rs 999- which is priced just below Rs 1000-

17

Example

MOTOYUVA - W156 prices at Rs 1099-

Samsung Guru- Rs 2999-

5 Current Trend in Mobile Industry

-- With saturation in the urban market growth in Indian mobile market will be driven

by an increased focus on the rural market aggressive promotions and handset

bundle offers

-- As of March 2007 mobile subscribers in rural India accounted just 20 of the

Indian mobile subscriber base However it is forecasted to grow at a CAGR of more

than 47 during 2007 to 2010

-- In order to remain competitive the mobile industry could see several mergers and

acquisitions roll out obligation and substantiate equity holding in more than one

telecom company

-- The major growth in mobile phone subscribers will be seen in C Circle and B

Circle in short-term

-- Enormous opportunities are emerging for the low cost handset manufacturers

along with low tariffs infrastructure development for mobile communication

-- Rural India will account for around 35-38 of the total mobile handset sales by

2010

18

The industrys spectacular growth in India is attracting the attention of several

international brands Glenn Smith reports

SECTOR INSIGHT

The growth of Indias mobile sector has not gone unnoticed Last year Virgin Mobile

agreed a deal to enter the market and Japans DoCoMo bought into mobile operator

Tata to stake its claim in the fast-expanding industry

India offers astounding growth statistics In October 2008 according to the Telecom

Regulatory Authority of India (Trai) 104 million Indians signed up for a phone

service pushing the national total to 3639 million a penetration of 315 per cent

Only 10 years earlier India had a mere 880000 phones most of them landlinesfor

one billion people Today fixed-line phones account for only 105 per cent - 382

million subscribers and this absolute number is slowly declining Wireless operators

meanwhile are surging ahead Many first-time phone buyers are opting for mobile

and will drive the total subscriber base to 500 million by 2010according toTrai

The expansion has been fuelled by recent economic prosperity but the accelerant is

an ever-increasing affordability of handsets and services Mobile phone service costs

have plummeted In March 1999 the effective charge was more than 1532 rupees

(US$031) per minute which fell by half in 2000 again in 2001 and repeatedly

dropped until today - at less than a rupee it is believed to be the cheapest rate in the

worldThe sectors expansion is not expected to be hit by the economic slowdown

Market growth is moving away from the cities and going into the villages and rural

areas says Shankari Panchapakesan executive director of mobile services The

Nielsen Company South Asia The macroeconomy wont impact this because rural

people are using phones in ways that make a difference in their life how they work

how they educate their children and how they access information

Fishermen for example use phones to find outlets for their catch Women earn a

living with phone exchanges Carpenters carve their numbers on village walls For

handsets the undisputed leader is Nokia The Finnish telephone giant has been in

India since 1994 and has invested in three RampD labs making facilities and

distribution partnerships

Naresh Priyadarshihead of Synovate Business Consulting says Nokia has 90000

distributors in India giving it a 90 per cent retail footprint There are also 30000plus

stores that sell Nokia exclusively Nokia has concept stores in at least seven major

cities

Together Indias retail outlets sold 132 million handsets worth 700 billion rupees in

2008 according to Synovate Nokias share of value was 59 per cent followed by

19

Sony Ericsson with a distant eight per cent Samsung with seven per cent and

Motorola with six per cent Smartphones account for 24 percent of sales according

to Synovate with mid-priced feature phones taking 28 per cent and the remainder -

48 per cent - being ultra-low-cost phones Handset makers see ultra-low-cost

phones as the road ahead despite the razorthin profit margins Already sales of

cheap handsets are depressing average prices Euromonitor estimates that unit

prices fell 50 per cent between 2004 and 2007 to an average of 2808 rupees

To put handsets within reach of Indias rural poor phone makers have had to rethink

product design The Nokia 1100 included a torch alarm clock and a radio Nokias

entry-level phones are now priced at 1500 rupees Spice Mobile halved that with its

Peoples Phone priced at 599 rupees including lifetime prepaid activation

To bond with rural users Nokia is launching a subscription-based service called Life

tools with information on agriculture and education Such phone services will serve

as the first online experience for rural Indians

Among affluent urban users value-added-services (VAS) for feature phones are

seen as the way forward Synovate reports VAS at 50 million rupees in 2008 and

fore- casts 70 per cent annual growth to push that to 165 million rupees by 2010 It is

this fast-growing rapidly diversifying market that is attractive to overseas firms

though they should not expect much profit in the short term

Some important facts about Rural Coverage-

bull About 70 percent of Indias near 12 billion inhabitants live in rural

communities

bull rural teledensity was a mere 126 percent

bull Rural wire line connections totaled 1068 million at the end of December

down by 246 percent from 1095 million at the end of Septemberr 2009

bull The rural wireless subscriber base hit 9315 million at the end of the year up

238 percent from 9098 million at the end of September

bull Department of Telecom and BSNL have signed an agreement to provide

861000 connections to individual users and government institutions through

rural and remote exchanges by 2014

bull To promote rural rollout by the private operators the Indian government

imposed Universal Service Obligations (USO) on the countrys operators to

build a fund that can finance the rollout of services in areas where there isnt

an obvious or pressing business case to do so

bull The first phase of mobile infrastructure deployment under the USO fund

scheme commissioned six different service providers to deploy 7871 towers

bull However by the end of October 2009 only 1934 towers had been installed

20

bull The second phase complete with a tender for an additional 11049 sites has

yet to be started

bull The phased rollouts associated with the USO scheme require an additional

40875 mobile towers to be erected

bull Add this to the number of towers required for the five new 2G networks

additional coverage and capacity for existing operators and the introduction

of 3G networks and there is a huge demand for new cell sites right across the

country

6 Future of Mobile Industry

Demand Among Poor Farmers Keeps an Industry Growing as Other Sectors of the

Economy Are Jolted Rural customers have been hungry for mobile phones for a

long time so demand will remain unaffected by the global jitters said SP Shukla

chief executive officer of the mobile business at Reliance Communications India Ltd

Indias second-largest cellular company by number of subscribers

Even amid the global economic slowdown one Indian industry continues to boom

selling cellphones to the rural poor

Economists have slashed Indian economic growth forecasts for this year and the

stock market is in the doldrums But cellphone companies are signing millions of new

subscribers a month making India the fastest growing mobile-phone market in the

world There is no sign of a slowdown yet figures to be released later this month are

expected to show that new subscriptions in January reached a record 11 million

The demand for cellphones is coming mainly from rural consumers who typically

earn less than $1000 a year These buyers havent been affected by plunging stock

and real-estate prices or tighter bank lending since they typically dont own land and

dont borrow A large majority of them dont have access to regular landline phone

networks -- there are only about 40 million landline subscribers in India -- so once

cellular coverage comes to their towns or villages they scramble to get their first

phones

In the village of Karanehalli a cluster of simple homes around an intersection of two

dirt roads about 40 miles from Indias high-tech capital of Bangalore Farmer KT

Srinivasa doesnt have a toilet for his home or a tractor for his field But when a red

and white cellular tower sprouted in his village he splurged on a cellphone

While the way his family threshes rice -- crushing it with a massive stone roller --

hasnt changed for generations his phone has changed the way he farms He uses it

to decide when to plant and harvest by calling other farmers to get the best prices

21

for his rice coconuts and jasmine by calling wholesalers and to save hours of time

waiting on the road for deliveries and pickups that rarely come on time

Life is much better with the cellphone he said from his rice paddy in the shadow of

the new tower I bring it with me to the fields and anyone can reach me here

Mr Srinivasa like close to half the 800 people in his village uses Idea Cellular Ltd

as it was the first to bring them service He paid the equivalent of about $60 for his

Nokia phone and spends about $6 each month for service Like most rural users

Mr Srinivasa uses his phone to make voice calls -- he doesnt know how to text

message or to download emails On average rural Indians use their phones around

85 hours a month up 10 over the past year

The story is the same across rural India home to more than 60 of Indias

population of 12 billion China Indonesia and Brazil also continue to show solid

growth in cellphone sales

The continued expansion of the cellphone industry in India stands in sharp contrast

to most other industries here Textile and software exporters are struggling Indias

brand new malls are sparsely populated and the sales of cars trucks tractors and

motorcycles have declined in recent months

But the cellphone industry recorded more than 10 million new subscribers in

December up from eight million a year earlier The industrys overall subscriber base

grew 48 in 2008 to 347 million customers

Rural customers have been hungry for mobile phones for a long time so demand

will remain unaffected

22

7 References

httpenwikipediaorgwikiCommunications_in_India

httpwwwicmrindiaorgcasestudiescatalogueBusiness20StrategyBSTR174htm

wwwvitalanalyticsin

httpwwwfonearenacommobile_phone_pricelisthtml

wwwmobile-prices-indiacom

httpwwwmobile-prices-indiacomNokia_Mobile_Phonesphp

httpwebebscohostcom

httpwwwindia-cellularcomMobile-Priceshtm

httpproquestumicompqdwebindex=8ampdid=1635821441ampSrchMode=1ampsid=3ampF

mt=3ampVInst=PRODampVType=PQDampRQT=309ampVName=PQDampTS=1264756239ampclien

tId=135690

14

Apple-iPhone-3G-S-32GB Price | Rate Rs 42500-

4 Value Pricing This is pricing strategy in which a company wins loyal customers

by charging a fairly low price for a high quality offering

Example Nokia E 63 Mobile

This mobile is priced at Rs 11260- This mobile offers a large number of high end

applications like Web-Browsing Email Data Network GPRS GPS amp Navigation

and lots of other facilities apart from serving the basic mobile functions At the same

time it has a sleek body amp robust structure

A image of this mobile has been shown below

15

5 Product form pricing Different versions of the same product are priced

differently

Examples Nokia-5000 is priced at Rs 4300- Whereas Nokia-7210C-Supernova is

priced at Rs 4800- offers almost the same features The reason for difference in

pricing is due to the sleek structure of Nokia-7210C

16

6 Promotional Pricing

1 Special Event Pricing In this case special prices are offered during special

occasions like festivals to increase the sales Example Last Diwali (September 2009) Samsung offered discounts on

Samsung Omnia mobile phone Their market price at that time was Rs

33990- whereas their discounted price for Diwali was Rs Rs 31990-

2 Low-Interest financing

Company can offer low interest financing to customer This will reduce the

burden of initial cost to the customer

Example In 2009 Nokia piloted a scheme in two Indian states where it sold

handsets on a weekly instalment of 100 rupees ($2) over 25 weeks period

3 Psychological Discounting

This is done to make the customer believe that product is priced cheaply or

some cases just break the price barrier that customer has in his mind like

price at price Rs 999- which is priced just below Rs 1000-

17

Example

MOTOYUVA - W156 prices at Rs 1099-

Samsung Guru- Rs 2999-

5 Current Trend in Mobile Industry

-- With saturation in the urban market growth in Indian mobile market will be driven

by an increased focus on the rural market aggressive promotions and handset

bundle offers

-- As of March 2007 mobile subscribers in rural India accounted just 20 of the

Indian mobile subscriber base However it is forecasted to grow at a CAGR of more

than 47 during 2007 to 2010

-- In order to remain competitive the mobile industry could see several mergers and

acquisitions roll out obligation and substantiate equity holding in more than one

telecom company

-- The major growth in mobile phone subscribers will be seen in C Circle and B

Circle in short-term

-- Enormous opportunities are emerging for the low cost handset manufacturers

along with low tariffs infrastructure development for mobile communication

-- Rural India will account for around 35-38 of the total mobile handset sales by

2010

18

The industrys spectacular growth in India is attracting the attention of several

international brands Glenn Smith reports

SECTOR INSIGHT

The growth of Indias mobile sector has not gone unnoticed Last year Virgin Mobile

agreed a deal to enter the market and Japans DoCoMo bought into mobile operator

Tata to stake its claim in the fast-expanding industry

India offers astounding growth statistics In October 2008 according to the Telecom

Regulatory Authority of India (Trai) 104 million Indians signed up for a phone

service pushing the national total to 3639 million a penetration of 315 per cent

Only 10 years earlier India had a mere 880000 phones most of them landlinesfor

one billion people Today fixed-line phones account for only 105 per cent - 382

million subscribers and this absolute number is slowly declining Wireless operators

meanwhile are surging ahead Many first-time phone buyers are opting for mobile

and will drive the total subscriber base to 500 million by 2010according toTrai

The expansion has been fuelled by recent economic prosperity but the accelerant is

an ever-increasing affordability of handsets and services Mobile phone service costs

have plummeted In March 1999 the effective charge was more than 1532 rupees

(US$031) per minute which fell by half in 2000 again in 2001 and repeatedly

dropped until today - at less than a rupee it is believed to be the cheapest rate in the

worldThe sectors expansion is not expected to be hit by the economic slowdown

Market growth is moving away from the cities and going into the villages and rural

areas says Shankari Panchapakesan executive director of mobile services The

Nielsen Company South Asia The macroeconomy wont impact this because rural

people are using phones in ways that make a difference in their life how they work

how they educate their children and how they access information

Fishermen for example use phones to find outlets for their catch Women earn a

living with phone exchanges Carpenters carve their numbers on village walls For

handsets the undisputed leader is Nokia The Finnish telephone giant has been in

India since 1994 and has invested in three RampD labs making facilities and

distribution partnerships

Naresh Priyadarshihead of Synovate Business Consulting says Nokia has 90000

distributors in India giving it a 90 per cent retail footprint There are also 30000plus

stores that sell Nokia exclusively Nokia has concept stores in at least seven major

cities

Together Indias retail outlets sold 132 million handsets worth 700 billion rupees in

2008 according to Synovate Nokias share of value was 59 per cent followed by

19

Sony Ericsson with a distant eight per cent Samsung with seven per cent and

Motorola with six per cent Smartphones account for 24 percent of sales according

to Synovate with mid-priced feature phones taking 28 per cent and the remainder -

48 per cent - being ultra-low-cost phones Handset makers see ultra-low-cost

phones as the road ahead despite the razorthin profit margins Already sales of

cheap handsets are depressing average prices Euromonitor estimates that unit

prices fell 50 per cent between 2004 and 2007 to an average of 2808 rupees

To put handsets within reach of Indias rural poor phone makers have had to rethink

product design The Nokia 1100 included a torch alarm clock and a radio Nokias

entry-level phones are now priced at 1500 rupees Spice Mobile halved that with its

Peoples Phone priced at 599 rupees including lifetime prepaid activation

To bond with rural users Nokia is launching a subscription-based service called Life

tools with information on agriculture and education Such phone services will serve

as the first online experience for rural Indians

Among affluent urban users value-added-services (VAS) for feature phones are

seen as the way forward Synovate reports VAS at 50 million rupees in 2008 and

fore- casts 70 per cent annual growth to push that to 165 million rupees by 2010 It is

this fast-growing rapidly diversifying market that is attractive to overseas firms

though they should not expect much profit in the short term

Some important facts about Rural Coverage-

bull About 70 percent of Indias near 12 billion inhabitants live in rural

communities

bull rural teledensity was a mere 126 percent

bull Rural wire line connections totaled 1068 million at the end of December

down by 246 percent from 1095 million at the end of Septemberr 2009

bull The rural wireless subscriber base hit 9315 million at the end of the year up

238 percent from 9098 million at the end of September

bull Department of Telecom and BSNL have signed an agreement to provide

861000 connections to individual users and government institutions through

rural and remote exchanges by 2014

bull To promote rural rollout by the private operators the Indian government

imposed Universal Service Obligations (USO) on the countrys operators to

build a fund that can finance the rollout of services in areas where there isnt

an obvious or pressing business case to do so

bull The first phase of mobile infrastructure deployment under the USO fund

scheme commissioned six different service providers to deploy 7871 towers

bull However by the end of October 2009 only 1934 towers had been installed

20

bull The second phase complete with a tender for an additional 11049 sites has

yet to be started

bull The phased rollouts associated with the USO scheme require an additional

40875 mobile towers to be erected

bull Add this to the number of towers required for the five new 2G networks

additional coverage and capacity for existing operators and the introduction

of 3G networks and there is a huge demand for new cell sites right across the

country

6 Future of Mobile Industry

Demand Among Poor Farmers Keeps an Industry Growing as Other Sectors of the

Economy Are Jolted Rural customers have been hungry for mobile phones for a

long time so demand will remain unaffected by the global jitters said SP Shukla

chief executive officer of the mobile business at Reliance Communications India Ltd

Indias second-largest cellular company by number of subscribers

Even amid the global economic slowdown one Indian industry continues to boom

selling cellphones to the rural poor

Economists have slashed Indian economic growth forecasts for this year and the

stock market is in the doldrums But cellphone companies are signing millions of new

subscribers a month making India the fastest growing mobile-phone market in the

world There is no sign of a slowdown yet figures to be released later this month are

expected to show that new subscriptions in January reached a record 11 million

The demand for cellphones is coming mainly from rural consumers who typically

earn less than $1000 a year These buyers havent been affected by plunging stock

and real-estate prices or tighter bank lending since they typically dont own land and

dont borrow A large majority of them dont have access to regular landline phone

networks -- there are only about 40 million landline subscribers in India -- so once

cellular coverage comes to their towns or villages they scramble to get their first

phones

In the village of Karanehalli a cluster of simple homes around an intersection of two

dirt roads about 40 miles from Indias high-tech capital of Bangalore Farmer KT

Srinivasa doesnt have a toilet for his home or a tractor for his field But when a red

and white cellular tower sprouted in his village he splurged on a cellphone

While the way his family threshes rice -- crushing it with a massive stone roller --

hasnt changed for generations his phone has changed the way he farms He uses it

to decide when to plant and harvest by calling other farmers to get the best prices

21

for his rice coconuts and jasmine by calling wholesalers and to save hours of time

waiting on the road for deliveries and pickups that rarely come on time

Life is much better with the cellphone he said from his rice paddy in the shadow of

the new tower I bring it with me to the fields and anyone can reach me here

Mr Srinivasa like close to half the 800 people in his village uses Idea Cellular Ltd

as it was the first to bring them service He paid the equivalent of about $60 for his

Nokia phone and spends about $6 each month for service Like most rural users

Mr Srinivasa uses his phone to make voice calls -- he doesnt know how to text

message or to download emails On average rural Indians use their phones around

85 hours a month up 10 over the past year

The story is the same across rural India home to more than 60 of Indias

population of 12 billion China Indonesia and Brazil also continue to show solid

growth in cellphone sales

The continued expansion of the cellphone industry in India stands in sharp contrast

to most other industries here Textile and software exporters are struggling Indias

brand new malls are sparsely populated and the sales of cars trucks tractors and

motorcycles have declined in recent months

But the cellphone industry recorded more than 10 million new subscribers in

December up from eight million a year earlier The industrys overall subscriber base

grew 48 in 2008 to 347 million customers

Rural customers have been hungry for mobile phones for a long time so demand

will remain unaffected

22

7 References

httpenwikipediaorgwikiCommunications_in_India

httpwwwicmrindiaorgcasestudiescatalogueBusiness20StrategyBSTR174htm

wwwvitalanalyticsin

httpwwwfonearenacommobile_phone_pricelisthtml

wwwmobile-prices-indiacom

httpwwwmobile-prices-indiacomNokia_Mobile_Phonesphp

httpwebebscohostcom

httpwwwindia-cellularcomMobile-Priceshtm

httpproquestumicompqdwebindex=8ampdid=1635821441ampSrchMode=1ampsid=3ampF

mt=3ampVInst=PRODampVType=PQDampRQT=309ampVName=PQDampTS=1264756239ampclien

tId=135690

15

5 Product form pricing Different versions of the same product are priced

differently

Examples Nokia-5000 is priced at Rs 4300- Whereas Nokia-7210C-Supernova is

priced at Rs 4800- offers almost the same features The reason for difference in

pricing is due to the sleek structure of Nokia-7210C

16

6 Promotional Pricing

1 Special Event Pricing In this case special prices are offered during special

occasions like festivals to increase the sales Example Last Diwali (September 2009) Samsung offered discounts on

Samsung Omnia mobile phone Their market price at that time was Rs

33990- whereas their discounted price for Diwali was Rs Rs 31990-

2 Low-Interest financing

Company can offer low interest financing to customer This will reduce the

burden of initial cost to the customer

Example In 2009 Nokia piloted a scheme in two Indian states where it sold

handsets on a weekly instalment of 100 rupees ($2) over 25 weeks period

3 Psychological Discounting

This is done to make the customer believe that product is priced cheaply or

some cases just break the price barrier that customer has in his mind like

price at price Rs 999- which is priced just below Rs 1000-

17

Example

MOTOYUVA - W156 prices at Rs 1099-

Samsung Guru- Rs 2999-

5 Current Trend in Mobile Industry

-- With saturation in the urban market growth in Indian mobile market will be driven

by an increased focus on the rural market aggressive promotions and handset

bundle offers

-- As of March 2007 mobile subscribers in rural India accounted just 20 of the

Indian mobile subscriber base However it is forecasted to grow at a CAGR of more

than 47 during 2007 to 2010

-- In order to remain competitive the mobile industry could see several mergers and

acquisitions roll out obligation and substantiate equity holding in more than one

telecom company

-- The major growth in mobile phone subscribers will be seen in C Circle and B

Circle in short-term

-- Enormous opportunities are emerging for the low cost handset manufacturers

along with low tariffs infrastructure development for mobile communication

-- Rural India will account for around 35-38 of the total mobile handset sales by

2010

18

The industrys spectacular growth in India is attracting the attention of several

international brands Glenn Smith reports

SECTOR INSIGHT

The growth of Indias mobile sector has not gone unnoticed Last year Virgin Mobile

agreed a deal to enter the market and Japans DoCoMo bought into mobile operator

Tata to stake its claim in the fast-expanding industry

India offers astounding growth statistics In October 2008 according to the Telecom

Regulatory Authority of India (Trai) 104 million Indians signed up for a phone

service pushing the national total to 3639 million a penetration of 315 per cent

Only 10 years earlier India had a mere 880000 phones most of them landlinesfor

one billion people Today fixed-line phones account for only 105 per cent - 382

million subscribers and this absolute number is slowly declining Wireless operators

meanwhile are surging ahead Many first-time phone buyers are opting for mobile

and will drive the total subscriber base to 500 million by 2010according toTrai

The expansion has been fuelled by recent economic prosperity but the accelerant is

an ever-increasing affordability of handsets and services Mobile phone service costs

have plummeted In March 1999 the effective charge was more than 1532 rupees

(US$031) per minute which fell by half in 2000 again in 2001 and repeatedly

dropped until today - at less than a rupee it is believed to be the cheapest rate in the

worldThe sectors expansion is not expected to be hit by the economic slowdown

Market growth is moving away from the cities and going into the villages and rural

areas says Shankari Panchapakesan executive director of mobile services The

Nielsen Company South Asia The macroeconomy wont impact this because rural

people are using phones in ways that make a difference in their life how they work

how they educate their children and how they access information

Fishermen for example use phones to find outlets for their catch Women earn a

living with phone exchanges Carpenters carve their numbers on village walls For

handsets the undisputed leader is Nokia The Finnish telephone giant has been in

India since 1994 and has invested in three RampD labs making facilities and

distribution partnerships

Naresh Priyadarshihead of Synovate Business Consulting says Nokia has 90000

distributors in India giving it a 90 per cent retail footprint There are also 30000plus

stores that sell Nokia exclusively Nokia has concept stores in at least seven major

cities

Together Indias retail outlets sold 132 million handsets worth 700 billion rupees in

2008 according to Synovate Nokias share of value was 59 per cent followed by

19

Sony Ericsson with a distant eight per cent Samsung with seven per cent and

Motorola with six per cent Smartphones account for 24 percent of sales according

to Synovate with mid-priced feature phones taking 28 per cent and the remainder -

48 per cent - being ultra-low-cost phones Handset makers see ultra-low-cost

phones as the road ahead despite the razorthin profit margins Already sales of

cheap handsets are depressing average prices Euromonitor estimates that unit

prices fell 50 per cent between 2004 and 2007 to an average of 2808 rupees

To put handsets within reach of Indias rural poor phone makers have had to rethink

product design The Nokia 1100 included a torch alarm clock and a radio Nokias

entry-level phones are now priced at 1500 rupees Spice Mobile halved that with its

Peoples Phone priced at 599 rupees including lifetime prepaid activation

To bond with rural users Nokia is launching a subscription-based service called Life

tools with information on agriculture and education Such phone services will serve

as the first online experience for rural Indians

Among affluent urban users value-added-services (VAS) for feature phones are

seen as the way forward Synovate reports VAS at 50 million rupees in 2008 and

fore- casts 70 per cent annual growth to push that to 165 million rupees by 2010 It is

this fast-growing rapidly diversifying market that is attractive to overseas firms

though they should not expect much profit in the short term

Some important facts about Rural Coverage-

bull About 70 percent of Indias near 12 billion inhabitants live in rural

communities

bull rural teledensity was a mere 126 percent

bull Rural wire line connections totaled 1068 million at the end of December

down by 246 percent from 1095 million at the end of Septemberr 2009

bull The rural wireless subscriber base hit 9315 million at the end of the year up

238 percent from 9098 million at the end of September

bull Department of Telecom and BSNL have signed an agreement to provide

861000 connections to individual users and government institutions through

rural and remote exchanges by 2014

bull To promote rural rollout by the private operators the Indian government

imposed Universal Service Obligations (USO) on the countrys operators to

build a fund that can finance the rollout of services in areas where there isnt

an obvious or pressing business case to do so

bull The first phase of mobile infrastructure deployment under the USO fund

scheme commissioned six different service providers to deploy 7871 towers

bull However by the end of October 2009 only 1934 towers had been installed

20

bull The second phase complete with a tender for an additional 11049 sites has

yet to be started

bull The phased rollouts associated with the USO scheme require an additional

40875 mobile towers to be erected

bull Add this to the number of towers required for the five new 2G networks

additional coverage and capacity for existing operators and the introduction

of 3G networks and there is a huge demand for new cell sites right across the

country

6 Future of Mobile Industry

Demand Among Poor Farmers Keeps an Industry Growing as Other Sectors of the

Economy Are Jolted Rural customers have been hungry for mobile phones for a

long time so demand will remain unaffected by the global jitters said SP Shukla

chief executive officer of the mobile business at Reliance Communications India Ltd

Indias second-largest cellular company by number of subscribers

Even amid the global economic slowdown one Indian industry continues to boom

selling cellphones to the rural poor

Economists have slashed Indian economic growth forecasts for this year and the

stock market is in the doldrums But cellphone companies are signing millions of new

subscribers a month making India the fastest growing mobile-phone market in the

world There is no sign of a slowdown yet figures to be released later this month are

expected to show that new subscriptions in January reached a record 11 million

The demand for cellphones is coming mainly from rural consumers who typically

earn less than $1000 a year These buyers havent been affected by plunging stock

and real-estate prices or tighter bank lending since they typically dont own land and

dont borrow A large majority of them dont have access to regular landline phone

networks -- there are only about 40 million landline subscribers in India -- so once

cellular coverage comes to their towns or villages they scramble to get their first

phones

In the village of Karanehalli a cluster of simple homes around an intersection of two

dirt roads about 40 miles from Indias high-tech capital of Bangalore Farmer KT

Srinivasa doesnt have a toilet for his home or a tractor for his field But when a red

and white cellular tower sprouted in his village he splurged on a cellphone

While the way his family threshes rice -- crushing it with a massive stone roller --

hasnt changed for generations his phone has changed the way he farms He uses it

to decide when to plant and harvest by calling other farmers to get the best prices

21

for his rice coconuts and jasmine by calling wholesalers and to save hours of time

waiting on the road for deliveries and pickups that rarely come on time

Life is much better with the cellphone he said from his rice paddy in the shadow of

the new tower I bring it with me to the fields and anyone can reach me here

Mr Srinivasa like close to half the 800 people in his village uses Idea Cellular Ltd

as it was the first to bring them service He paid the equivalent of about $60 for his

Nokia phone and spends about $6 each month for service Like most rural users

Mr Srinivasa uses his phone to make voice calls -- he doesnt know how to text

message or to download emails On average rural Indians use their phones around

85 hours a month up 10 over the past year

The story is the same across rural India home to more than 60 of Indias

population of 12 billion China Indonesia and Brazil also continue to show solid

growth in cellphone sales

The continued expansion of the cellphone industry in India stands in sharp contrast

to most other industries here Textile and software exporters are struggling Indias

brand new malls are sparsely populated and the sales of cars trucks tractors and

motorcycles have declined in recent months

But the cellphone industry recorded more than 10 million new subscribers in

December up from eight million a year earlier The industrys overall subscriber base

grew 48 in 2008 to 347 million customers

Rural customers have been hungry for mobile phones for a long time so demand

will remain unaffected

22

7 References

httpenwikipediaorgwikiCommunications_in_India

httpwwwicmrindiaorgcasestudiescatalogueBusiness20StrategyBSTR174htm

wwwvitalanalyticsin

httpwwwfonearenacommobile_phone_pricelisthtml

wwwmobile-prices-indiacom

httpwwwmobile-prices-indiacomNokia_Mobile_Phonesphp

httpwebebscohostcom

httpwwwindia-cellularcomMobile-Priceshtm

httpproquestumicompqdwebindex=8ampdid=1635821441ampSrchMode=1ampsid=3ampF

mt=3ampVInst=PRODampVType=PQDampRQT=309ampVName=PQDampTS=1264756239ampclien

tId=135690

16

6 Promotional Pricing

1 Special Event Pricing In this case special prices are offered during special

occasions like festivals to increase the sales Example Last Diwali (September 2009) Samsung offered discounts on

Samsung Omnia mobile phone Their market price at that time was Rs

33990- whereas their discounted price for Diwali was Rs Rs 31990-

2 Low-Interest financing

Company can offer low interest financing to customer This will reduce the

burden of initial cost to the customer

Example In 2009 Nokia piloted a scheme in two Indian states where it sold

handsets on a weekly instalment of 100 rupees ($2) over 25 weeks period

3 Psychological Discounting

This is done to make the customer believe that product is priced cheaply or

some cases just break the price barrier that customer has in his mind like

price at price Rs 999- which is priced just below Rs 1000-

17

Example

MOTOYUVA - W156 prices at Rs 1099-

Samsung Guru- Rs 2999-

5 Current Trend in Mobile Industry

-- With saturation in the urban market growth in Indian mobile market will be driven

by an increased focus on the rural market aggressive promotions and handset

bundle offers

-- As of March 2007 mobile subscribers in rural India accounted just 20 of the

Indian mobile subscriber base However it is forecasted to grow at a CAGR of more

than 47 during 2007 to 2010

-- In order to remain competitive the mobile industry could see several mergers and

acquisitions roll out obligation and substantiate equity holding in more than one

telecom company

-- The major growth in mobile phone subscribers will be seen in C Circle and B

Circle in short-term

-- Enormous opportunities are emerging for the low cost handset manufacturers

along with low tariffs infrastructure development for mobile communication

-- Rural India will account for around 35-38 of the total mobile handset sales by

2010

18

The industrys spectacular growth in India is attracting the attention of several

international brands Glenn Smith reports

SECTOR INSIGHT

The growth of Indias mobile sector has not gone unnoticed Last year Virgin Mobile

agreed a deal to enter the market and Japans DoCoMo bought into mobile operator

Tata to stake its claim in the fast-expanding industry

India offers astounding growth statistics In October 2008 according to the Telecom

Regulatory Authority of India (Trai) 104 million Indians signed up for a phone

service pushing the national total to 3639 million a penetration of 315 per cent

Only 10 years earlier India had a mere 880000 phones most of them landlinesfor

one billion people Today fixed-line phones account for only 105 per cent - 382

million subscribers and this absolute number is slowly declining Wireless operators

meanwhile are surging ahead Many first-time phone buyers are opting for mobile

and will drive the total subscriber base to 500 million by 2010according toTrai

The expansion has been fuelled by recent economic prosperity but the accelerant is

an ever-increasing affordability of handsets and services Mobile phone service costs

have plummeted In March 1999 the effective charge was more than 1532 rupees

(US$031) per minute which fell by half in 2000 again in 2001 and repeatedly

dropped until today - at less than a rupee it is believed to be the cheapest rate in the

worldThe sectors expansion is not expected to be hit by the economic slowdown

Market growth is moving away from the cities and going into the villages and rural

areas says Shankari Panchapakesan executive director of mobile services The

Nielsen Company South Asia The macroeconomy wont impact this because rural

people are using phones in ways that make a difference in their life how they work

how they educate their children and how they access information

Fishermen for example use phones to find outlets for their catch Women earn a

living with phone exchanges Carpenters carve their numbers on village walls For

handsets the undisputed leader is Nokia The Finnish telephone giant has been in

India since 1994 and has invested in three RampD labs making facilities and

distribution partnerships

Naresh Priyadarshihead of Synovate Business Consulting says Nokia has 90000

distributors in India giving it a 90 per cent retail footprint There are also 30000plus

stores that sell Nokia exclusively Nokia has concept stores in at least seven major

cities

Together Indias retail outlets sold 132 million handsets worth 700 billion rupees in

2008 according to Synovate Nokias share of value was 59 per cent followed by

19

Sony Ericsson with a distant eight per cent Samsung with seven per cent and

Motorola with six per cent Smartphones account for 24 percent of sales according

to Synovate with mid-priced feature phones taking 28 per cent and the remainder -

48 per cent - being ultra-low-cost phones Handset makers see ultra-low-cost

phones as the road ahead despite the razorthin profit margins Already sales of

cheap handsets are depressing average prices Euromonitor estimates that unit

prices fell 50 per cent between 2004 and 2007 to an average of 2808 rupees

To put handsets within reach of Indias rural poor phone makers have had to rethink

product design The Nokia 1100 included a torch alarm clock and a radio Nokias

entry-level phones are now priced at 1500 rupees Spice Mobile halved that with its

Peoples Phone priced at 599 rupees including lifetime prepaid activation

To bond with rural users Nokia is launching a subscription-based service called Life

tools with information on agriculture and education Such phone services will serve

as the first online experience for rural Indians

Among affluent urban users value-added-services (VAS) for feature phones are

seen as the way forward Synovate reports VAS at 50 million rupees in 2008 and

fore- casts 70 per cent annual growth to push that to 165 million rupees by 2010 It is

this fast-growing rapidly diversifying market that is attractive to overseas firms

though they should not expect much profit in the short term

Some important facts about Rural Coverage-

bull About 70 percent of Indias near 12 billion inhabitants live in rural

communities

bull rural teledensity was a mere 126 percent

bull Rural wire line connections totaled 1068 million at the end of December

down by 246 percent from 1095 million at the end of Septemberr 2009

bull The rural wireless subscriber base hit 9315 million at the end of the year up

238 percent from 9098 million at the end of September

bull Department of Telecom and BSNL have signed an agreement to provide

861000 connections to individual users and government institutions through

rural and remote exchanges by 2014

bull To promote rural rollout by the private operators the Indian government

imposed Universal Service Obligations (USO) on the countrys operators to

build a fund that can finance the rollout of services in areas where there isnt

an obvious or pressing business case to do so

bull The first phase of mobile infrastructure deployment under the USO fund

scheme commissioned six different service providers to deploy 7871 towers

bull However by the end of October 2009 only 1934 towers had been installed

20

bull The second phase complete with a tender for an additional 11049 sites has

yet to be started

bull The phased rollouts associated with the USO scheme require an additional

40875 mobile towers to be erected

bull Add this to the number of towers required for the five new 2G networks

additional coverage and capacity for existing operators and the introduction

of 3G networks and there is a huge demand for new cell sites right across the

country

6 Future of Mobile Industry

Demand Among Poor Farmers Keeps an Industry Growing as Other Sectors of the

Economy Are Jolted Rural customers have been hungry for mobile phones for a

long time so demand will remain unaffected by the global jitters said SP Shukla

chief executive officer of the mobile business at Reliance Communications India Ltd

Indias second-largest cellular company by number of subscribers

Even amid the global economic slowdown one Indian industry continues to boom

selling cellphones to the rural poor

Economists have slashed Indian economic growth forecasts for this year and the

stock market is in the doldrums But cellphone companies are signing millions of new

subscribers a month making India the fastest growing mobile-phone market in the

world There is no sign of a slowdown yet figures to be released later this month are

expected to show that new subscriptions in January reached a record 11 million

The demand for cellphones is coming mainly from rural consumers who typically

earn less than $1000 a year These buyers havent been affected by plunging stock

and real-estate prices or tighter bank lending since they typically dont own land and

dont borrow A large majority of them dont have access to regular landline phone

networks -- there are only about 40 million landline subscribers in India -- so once

cellular coverage comes to their towns or villages they scramble to get their first

phones

In the village of Karanehalli a cluster of simple homes around an intersection of two

dirt roads about 40 miles from Indias high-tech capital of Bangalore Farmer KT

Srinivasa doesnt have a toilet for his home or a tractor for his field But when a red

and white cellular tower sprouted in his village he splurged on a cellphone

While the way his family threshes rice -- crushing it with a massive stone roller --

hasnt changed for generations his phone has changed the way he farms He uses it

to decide when to plant and harvest by calling other farmers to get the best prices

21

for his rice coconuts and jasmine by calling wholesalers and to save hours of time

waiting on the road for deliveries and pickups that rarely come on time

Life is much better with the cellphone he said from his rice paddy in the shadow of

the new tower I bring it with me to the fields and anyone can reach me here

Mr Srinivasa like close to half the 800 people in his village uses Idea Cellular Ltd

as it was the first to bring them service He paid the equivalent of about $60 for his

Nokia phone and spends about $6 each month for service Like most rural users

Mr Srinivasa uses his phone to make voice calls -- he doesnt know how to text

message or to download emails On average rural Indians use their phones around

85 hours a month up 10 over the past year

The story is the same across rural India home to more than 60 of Indias

population of 12 billion China Indonesia and Brazil also continue to show solid

growth in cellphone sales

The continued expansion of the cellphone industry in India stands in sharp contrast

to most other industries here Textile and software exporters are struggling Indias

brand new malls are sparsely populated and the sales of cars trucks tractors and

motorcycles have declined in recent months

But the cellphone industry recorded more than 10 million new subscribers in

December up from eight million a year earlier The industrys overall subscriber base

grew 48 in 2008 to 347 million customers

Rural customers have been hungry for mobile phones for a long time so demand

will remain unaffected

22

7 References

httpenwikipediaorgwikiCommunications_in_India

httpwwwicmrindiaorgcasestudiescatalogueBusiness20StrategyBSTR174htm

wwwvitalanalyticsin

httpwwwfonearenacommobile_phone_pricelisthtml

wwwmobile-prices-indiacom

httpwwwmobile-prices-indiacomNokia_Mobile_Phonesphp

httpwebebscohostcom

httpwwwindia-cellularcomMobile-Priceshtm

httpproquestumicompqdwebindex=8ampdid=1635821441ampSrchMode=1ampsid=3ampF

mt=3ampVInst=PRODampVType=PQDampRQT=309ampVName=PQDampTS=1264756239ampclien

tId=135690

17

Example

MOTOYUVA - W156 prices at Rs 1099-

Samsung Guru- Rs 2999-

5 Current Trend in Mobile Industry

-- With saturation in the urban market growth in Indian mobile market will be driven

by an increased focus on the rural market aggressive promotions and handset

bundle offers

-- As of March 2007 mobile subscribers in rural India accounted just 20 of the

Indian mobile subscriber base However it is forecasted to grow at a CAGR of more

than 47 during 2007 to 2010

-- In order to remain competitive the mobile industry could see several mergers and

acquisitions roll out obligation and substantiate equity holding in more than one

telecom company

-- The major growth in mobile phone subscribers will be seen in C Circle and B

Circle in short-term

-- Enormous opportunities are emerging for the low cost handset manufacturers

along with low tariffs infrastructure development for mobile communication

-- Rural India will account for around 35-38 of the total mobile handset sales by

2010

18

The industrys spectacular growth in India is attracting the attention of several

international brands Glenn Smith reports

SECTOR INSIGHT

The growth of Indias mobile sector has not gone unnoticed Last year Virgin Mobile

agreed a deal to enter the market and Japans DoCoMo bought into mobile operator

Tata to stake its claim in the fast-expanding industry

India offers astounding growth statistics In October 2008 according to the Telecom

Regulatory Authority of India (Trai) 104 million Indians signed up for a phone

service pushing the national total to 3639 million a penetration of 315 per cent

Only 10 years earlier India had a mere 880000 phones most of them landlinesfor

one billion people Today fixed-line phones account for only 105 per cent - 382

million subscribers and this absolute number is slowly declining Wireless operators

meanwhile are surging ahead Many first-time phone buyers are opting for mobile

and will drive the total subscriber base to 500 million by 2010according toTrai

The expansion has been fuelled by recent economic prosperity but the accelerant is

an ever-increasing affordability of handsets and services Mobile phone service costs

have plummeted In March 1999 the effective charge was more than 1532 rupees

(US$031) per minute which fell by half in 2000 again in 2001 and repeatedly

dropped until today - at less than a rupee it is believed to be the cheapest rate in the

worldThe sectors expansion is not expected to be hit by the economic slowdown

Market growth is moving away from the cities and going into the villages and rural

areas says Shankari Panchapakesan executive director of mobile services The

Nielsen Company South Asia The macroeconomy wont impact this because rural

people are using phones in ways that make a difference in their life how they work

how they educate their children and how they access information

Fishermen for example use phones to find outlets for their catch Women earn a

living with phone exchanges Carpenters carve their numbers on village walls For

handsets the undisputed leader is Nokia The Finnish telephone giant has been in

India since 1994 and has invested in three RampD labs making facilities and

distribution partnerships

Naresh Priyadarshihead of Synovate Business Consulting says Nokia has 90000

distributors in India giving it a 90 per cent retail footprint There are also 30000plus

stores that sell Nokia exclusively Nokia has concept stores in at least seven major

cities

Together Indias retail outlets sold 132 million handsets worth 700 billion rupees in

2008 according to Synovate Nokias share of value was 59 per cent followed by

19

Sony Ericsson with a distant eight per cent Samsung with seven per cent and

Motorola with six per cent Smartphones account for 24 percent of sales according

to Synovate with mid-priced feature phones taking 28 per cent and the remainder -

48 per cent - being ultra-low-cost phones Handset makers see ultra-low-cost

phones as the road ahead despite the razorthin profit margins Already sales of

cheap handsets are depressing average prices Euromonitor estimates that unit

prices fell 50 per cent between 2004 and 2007 to an average of 2808 rupees

To put handsets within reach of Indias rural poor phone makers have had to rethink

product design The Nokia 1100 included a torch alarm clock and a radio Nokias

entry-level phones are now priced at 1500 rupees Spice Mobile halved that with its

Peoples Phone priced at 599 rupees including lifetime prepaid activation

To bond with rural users Nokia is launching a subscription-based service called Life

tools with information on agriculture and education Such phone services will serve

as the first online experience for rural Indians

Among affluent urban users value-added-services (VAS) for feature phones are

seen as the way forward Synovate reports VAS at 50 million rupees in 2008 and

fore- casts 70 per cent annual growth to push that to 165 million rupees by 2010 It is

this fast-growing rapidly diversifying market that is attractive to overseas firms

though they should not expect much profit in the short term

Some important facts about Rural Coverage-

bull About 70 percent of Indias near 12 billion inhabitants live in rural

communities

bull rural teledensity was a mere 126 percent

bull Rural wire line connections totaled 1068 million at the end of December

down by 246 percent from 1095 million at the end of Septemberr 2009

bull The rural wireless subscriber base hit 9315 million at the end of the year up

238 percent from 9098 million at the end of September

bull Department of Telecom and BSNL have signed an agreement to provide

861000 connections to individual users and government institutions through

rural and remote exchanges by 2014

bull To promote rural rollout by the private operators the Indian government

imposed Universal Service Obligations (USO) on the countrys operators to

build a fund that can finance the rollout of services in areas where there isnt

an obvious or pressing business case to do so

bull The first phase of mobile infrastructure deployment under the USO fund

scheme commissioned six different service providers to deploy 7871 towers

bull However by the end of October 2009 only 1934 towers had been installed

20

bull The second phase complete with a tender for an additional 11049 sites has

yet to be started

bull The phased rollouts associated with the USO scheme require an additional

40875 mobile towers to be erected

bull Add this to the number of towers required for the five new 2G networks

additional coverage and capacity for existing operators and the introduction

of 3G networks and there is a huge demand for new cell sites right across the

country

6 Future of Mobile Industry

Demand Among Poor Farmers Keeps an Industry Growing as Other Sectors of the

Economy Are Jolted Rural customers have been hungry for mobile phones for a

long time so demand will remain unaffected by the global jitters said SP Shukla

chief executive officer of the mobile business at Reliance Communications India Ltd

Indias second-largest cellular company by number of subscribers

Even amid the global economic slowdown one Indian industry continues to boom

selling cellphones to the rural poor

Economists have slashed Indian economic growth forecasts for this year and the

stock market is in the doldrums But cellphone companies are signing millions of new

subscribers a month making India the fastest growing mobile-phone market in the

world There is no sign of a slowdown yet figures to be released later this month are

expected to show that new subscriptions in January reached a record 11 million

The demand for cellphones is coming mainly from rural consumers who typically

earn less than $1000 a year These buyers havent been affected by plunging stock

and real-estate prices or tighter bank lending since they typically dont own land and

dont borrow A large majority of them dont have access to regular landline phone

networks -- there are only about 40 million landline subscribers in India -- so once

cellular coverage comes to their towns or villages they scramble to get their first

phones

In the village of Karanehalli a cluster of simple homes around an intersection of two

dirt roads about 40 miles from Indias high-tech capital of Bangalore Farmer KT

Srinivasa doesnt have a toilet for his home or a tractor for his field But when a red

and white cellular tower sprouted in his village he splurged on a cellphone

While the way his family threshes rice -- crushing it with a massive stone roller --

hasnt changed for generations his phone has changed the way he farms He uses it

to decide when to plant and harvest by calling other farmers to get the best prices

21

for his rice coconuts and jasmine by calling wholesalers and to save hours of time

waiting on the road for deliveries and pickups that rarely come on time

Life is much better with the cellphone he said from his rice paddy in the shadow of

the new tower I bring it with me to the fields and anyone can reach me here

Mr Srinivasa like close to half the 800 people in his village uses Idea Cellular Ltd

as it was the first to bring them service He paid the equivalent of about $60 for his

Nokia phone and spends about $6 each month for service Like most rural users

Mr Srinivasa uses his phone to make voice calls -- he doesnt know how to text

message or to download emails On average rural Indians use their phones around

85 hours a month up 10 over the past year

The story is the same across rural India home to more than 60 of Indias

population of 12 billion China Indonesia and Brazil also continue to show solid

growth in cellphone sales

The continued expansion of the cellphone industry in India stands in sharp contrast

to most other industries here Textile and software exporters are struggling Indias

brand new malls are sparsely populated and the sales of cars trucks tractors and

motorcycles have declined in recent months

But the cellphone industry recorded more than 10 million new subscribers in

December up from eight million a year earlier The industrys overall subscriber base

grew 48 in 2008 to 347 million customers

Rural customers have been hungry for mobile phones for a long time so demand

will remain unaffected

22

7 References

httpenwikipediaorgwikiCommunications_in_India

httpwwwicmrindiaorgcasestudiescatalogueBusiness20StrategyBSTR174htm

wwwvitalanalyticsin

httpwwwfonearenacommobile_phone_pricelisthtml

wwwmobile-prices-indiacom

httpwwwmobile-prices-indiacomNokia_Mobile_Phonesphp

httpwebebscohostcom

httpwwwindia-cellularcomMobile-Priceshtm

httpproquestumicompqdwebindex=8ampdid=1635821441ampSrchMode=1ampsid=3ampF

mt=3ampVInst=PRODampVType=PQDampRQT=309ampVName=PQDampTS=1264756239ampclien

tId=135690

18

The industrys spectacular growth in India is attracting the attention of several

international brands Glenn Smith reports

SECTOR INSIGHT

The growth of Indias mobile sector has not gone unnoticed Last year Virgin Mobile

agreed a deal to enter the market and Japans DoCoMo bought into mobile operator

Tata to stake its claim in the fast-expanding industry

India offers astounding growth statistics In October 2008 according to the Telecom

Regulatory Authority of India (Trai) 104 million Indians signed up for a phone

service pushing the national total to 3639 million a penetration of 315 per cent

Only 10 years earlier India had a mere 880000 phones most of them landlinesfor

one billion people Today fixed-line phones account for only 105 per cent - 382

million subscribers and this absolute number is slowly declining Wireless operators

meanwhile are surging ahead Many first-time phone buyers are opting for mobile

and will drive the total subscriber base to 500 million by 2010according toTrai

The expansion has been fuelled by recent economic prosperity but the accelerant is

an ever-increasing affordability of handsets and services Mobile phone service costs

have plummeted In March 1999 the effective charge was more than 1532 rupees

(US$031) per minute which fell by half in 2000 again in 2001 and repeatedly

dropped until today - at less than a rupee it is believed to be the cheapest rate in the

worldThe sectors expansion is not expected to be hit by the economic slowdown

Market growth is moving away from the cities and going into the villages and rural

areas says Shankari Panchapakesan executive director of mobile services The

Nielsen Company South Asia The macroeconomy wont impact this because rural

people are using phones in ways that make a difference in their life how they work

how they educate their children and how they access information

Fishermen for example use phones to find outlets for their catch Women earn a

living with phone exchanges Carpenters carve their numbers on village walls For

handsets the undisputed leader is Nokia The Finnish telephone giant has been in

India since 1994 and has invested in three RampD labs making facilities and

distribution partnerships

Naresh Priyadarshihead of Synovate Business Consulting says Nokia has 90000

distributors in India giving it a 90 per cent retail footprint There are also 30000plus

stores that sell Nokia exclusively Nokia has concept stores in at least seven major

cities

Together Indias retail outlets sold 132 million handsets worth 700 billion rupees in

2008 according to Synovate Nokias share of value was 59 per cent followed by

19

Sony Ericsson with a distant eight per cent Samsung with seven per cent and

Motorola with six per cent Smartphones account for 24 percent of sales according

to Synovate with mid-priced feature phones taking 28 per cent and the remainder -

48 per cent - being ultra-low-cost phones Handset makers see ultra-low-cost

phones as the road ahead despite the razorthin profit margins Already sales of

cheap handsets are depressing average prices Euromonitor estimates that unit

prices fell 50 per cent between 2004 and 2007 to an average of 2808 rupees

To put handsets within reach of Indias rural poor phone makers have had to rethink

product design The Nokia 1100 included a torch alarm clock and a radio Nokias

entry-level phones are now priced at 1500 rupees Spice Mobile halved that with its

Peoples Phone priced at 599 rupees including lifetime prepaid activation

To bond with rural users Nokia is launching a subscription-based service called Life

tools with information on agriculture and education Such phone services will serve

as the first online experience for rural Indians

Among affluent urban users value-added-services (VAS) for feature phones are

seen as the way forward Synovate reports VAS at 50 million rupees in 2008 and

fore- casts 70 per cent annual growth to push that to 165 million rupees by 2010 It is

this fast-growing rapidly diversifying market that is attractive to overseas firms

though they should not expect much profit in the short term

Some important facts about Rural Coverage-

bull About 70 percent of Indias near 12 billion inhabitants live in rural

communities

bull rural teledensity was a mere 126 percent

bull Rural wire line connections totaled 1068 million at the end of December

down by 246 percent from 1095 million at the end of Septemberr 2009

bull The rural wireless subscriber base hit 9315 million at the end of the year up

238 percent from 9098 million at the end of September

bull Department of Telecom and BSNL have signed an agreement to provide

861000 connections to individual users and government institutions through

rural and remote exchanges by 2014

bull To promote rural rollout by the private operators the Indian government

imposed Universal Service Obligations (USO) on the countrys operators to

build a fund that can finance the rollout of services in areas where there isnt

an obvious or pressing business case to do so

bull The first phase of mobile infrastructure deployment under the USO fund

scheme commissioned six different service providers to deploy 7871 towers

bull However by the end of October 2009 only 1934 towers had been installed

20

bull The second phase complete with a tender for an additional 11049 sites has

yet to be started

bull The phased rollouts associated with the USO scheme require an additional

40875 mobile towers to be erected

bull Add this to the number of towers required for the five new 2G networks

additional coverage and capacity for existing operators and the introduction

of 3G networks and there is a huge demand for new cell sites right across the

country

6 Future of Mobile Industry

Demand Among Poor Farmers Keeps an Industry Growing as Other Sectors of the

Economy Are Jolted Rural customers have been hungry for mobile phones for a

long time so demand will remain unaffected by the global jitters said SP Shukla

chief executive officer of the mobile business at Reliance Communications India Ltd

Indias second-largest cellular company by number of subscribers

Even amid the global economic slowdown one Indian industry continues to boom

selling cellphones to the rural poor

Economists have slashed Indian economic growth forecasts for this year and the

stock market is in the doldrums But cellphone companies are signing millions of new

subscribers a month making India the fastest growing mobile-phone market in the

world There is no sign of a slowdown yet figures to be released later this month are

expected to show that new subscriptions in January reached a record 11 million

The demand for cellphones is coming mainly from rural consumers who typically

earn less than $1000 a year These buyers havent been affected by plunging stock

and real-estate prices or tighter bank lending since they typically dont own land and

dont borrow A large majority of them dont have access to regular landline phone

networks -- there are only about 40 million landline subscribers in India -- so once

cellular coverage comes to their towns or villages they scramble to get their first

phones

In the village of Karanehalli a cluster of simple homes around an intersection of two

dirt roads about 40 miles from Indias high-tech capital of Bangalore Farmer KT

Srinivasa doesnt have a toilet for his home or a tractor for his field But when a red

and white cellular tower sprouted in his village he splurged on a cellphone

While the way his family threshes rice -- crushing it with a massive stone roller --

hasnt changed for generations his phone has changed the way he farms He uses it

to decide when to plant and harvest by calling other farmers to get the best prices

21

for his rice coconuts and jasmine by calling wholesalers and to save hours of time

waiting on the road for deliveries and pickups that rarely come on time

Life is much better with the cellphone he said from his rice paddy in the shadow of

the new tower I bring it with me to the fields and anyone can reach me here

Mr Srinivasa like close to half the 800 people in his village uses Idea Cellular Ltd

as it was the first to bring them service He paid the equivalent of about $60 for his

Nokia phone and spends about $6 each month for service Like most rural users

Mr Srinivasa uses his phone to make voice calls -- he doesnt know how to text

message or to download emails On average rural Indians use their phones around

85 hours a month up 10 over the past year

The story is the same across rural India home to more than 60 of Indias

population of 12 billion China Indonesia and Brazil also continue to show solid

growth in cellphone sales

The continued expansion of the cellphone industry in India stands in sharp contrast

to most other industries here Textile and software exporters are struggling Indias

brand new malls are sparsely populated and the sales of cars trucks tractors and

motorcycles have declined in recent months

But the cellphone industry recorded more than 10 million new subscribers in

December up from eight million a year earlier The industrys overall subscriber base

grew 48 in 2008 to 347 million customers

Rural customers have been hungry for mobile phones for a long time so demand

will remain unaffected

22

7 References

httpenwikipediaorgwikiCommunications_in_India

httpwwwicmrindiaorgcasestudiescatalogueBusiness20StrategyBSTR174htm

wwwvitalanalyticsin

httpwwwfonearenacommobile_phone_pricelisthtml

wwwmobile-prices-indiacom

httpwwwmobile-prices-indiacomNokia_Mobile_Phonesphp

httpwebebscohostcom

httpwwwindia-cellularcomMobile-Priceshtm

httpproquestumicompqdwebindex=8ampdid=1635821441ampSrchMode=1ampsid=3ampF

mt=3ampVInst=PRODampVType=PQDampRQT=309ampVName=PQDampTS=1264756239ampclien

tId=135690

19

Sony Ericsson with a distant eight per cent Samsung with seven per cent and

Motorola with six per cent Smartphones account for 24 percent of sales according

to Synovate with mid-priced feature phones taking 28 per cent and the remainder -

48 per cent - being ultra-low-cost phones Handset makers see ultra-low-cost

phones as the road ahead despite the razorthin profit margins Already sales of

cheap handsets are depressing average prices Euromonitor estimates that unit

prices fell 50 per cent between 2004 and 2007 to an average of 2808 rupees

To put handsets within reach of Indias rural poor phone makers have had to rethink

product design The Nokia 1100 included a torch alarm clock and a radio Nokias

entry-level phones are now priced at 1500 rupees Spice Mobile halved that with its

Peoples Phone priced at 599 rupees including lifetime prepaid activation

To bond with rural users Nokia is launching a subscription-based service called Life

tools with information on agriculture and education Such phone services will serve

as the first online experience for rural Indians

Among affluent urban users value-added-services (VAS) for feature phones are

seen as the way forward Synovate reports VAS at 50 million rupees in 2008 and

fore- casts 70 per cent annual growth to push that to 165 million rupees by 2010 It is

this fast-growing rapidly diversifying market that is attractive to overseas firms

though they should not expect much profit in the short term

Some important facts about Rural Coverage-

bull About 70 percent of Indias near 12 billion inhabitants live in rural

communities

bull rural teledensity was a mere 126 percent

bull Rural wire line connections totaled 1068 million at the end of December

down by 246 percent from 1095 million at the end of Septemberr 2009

bull The rural wireless subscriber base hit 9315 million at the end of the year up

238 percent from 9098 million at the end of September

bull Department of Telecom and BSNL have signed an agreement to provide

861000 connections to individual users and government institutions through

rural and remote exchanges by 2014

bull To promote rural rollout by the private operators the Indian government

imposed Universal Service Obligations (USO) on the countrys operators to

build a fund that can finance the rollout of services in areas where there isnt

an obvious or pressing business case to do so

bull The first phase of mobile infrastructure deployment under the USO fund

scheme commissioned six different service providers to deploy 7871 towers

bull However by the end of October 2009 only 1934 towers had been installed

20

bull The second phase complete with a tender for an additional 11049 sites has

yet to be started

bull The phased rollouts associated with the USO scheme require an additional

40875 mobile towers to be erected

bull Add this to the number of towers required for the five new 2G networks

additional coverage and capacity for existing operators and the introduction

of 3G networks and there is a huge demand for new cell sites right across the

country

6 Future of Mobile Industry

Demand Among Poor Farmers Keeps an Industry Growing as Other Sectors of the

Economy Are Jolted Rural customers have been hungry for mobile phones for a

long time so demand will remain unaffected by the global jitters said SP Shukla

chief executive officer of the mobile business at Reliance Communications India Ltd

Indias second-largest cellular company by number of subscribers

Even amid the global economic slowdown one Indian industry continues to boom

selling cellphones to the rural poor

Economists have slashed Indian economic growth forecasts for this year and the

stock market is in the doldrums But cellphone companies are signing millions of new

subscribers a month making India the fastest growing mobile-phone market in the

world There is no sign of a slowdown yet figures to be released later this month are

expected to show that new subscriptions in January reached a record 11 million

The demand for cellphones is coming mainly from rural consumers who typically

earn less than $1000 a year These buyers havent been affected by plunging stock

and real-estate prices or tighter bank lending since they typically dont own land and

dont borrow A large majority of them dont have access to regular landline phone

networks -- there are only about 40 million landline subscribers in India -- so once

cellular coverage comes to their towns or villages they scramble to get their first

phones

In the village of Karanehalli a cluster of simple homes around an intersection of two

dirt roads about 40 miles from Indias high-tech capital of Bangalore Farmer KT

Srinivasa doesnt have a toilet for his home or a tractor for his field But when a red

and white cellular tower sprouted in his village he splurged on a cellphone

While the way his family threshes rice -- crushing it with a massive stone roller --

hasnt changed for generations his phone has changed the way he farms He uses it

to decide when to plant and harvest by calling other farmers to get the best prices

21

for his rice coconuts and jasmine by calling wholesalers and to save hours of time

waiting on the road for deliveries and pickups that rarely come on time

Life is much better with the cellphone he said from his rice paddy in the shadow of

the new tower I bring it with me to the fields and anyone can reach me here

Mr Srinivasa like close to half the 800 people in his village uses Idea Cellular Ltd

as it was the first to bring them service He paid the equivalent of about $60 for his

Nokia phone and spends about $6 each month for service Like most rural users

Mr Srinivasa uses his phone to make voice calls -- he doesnt know how to text

message or to download emails On average rural Indians use their phones around

85 hours a month up 10 over the past year

The story is the same across rural India home to more than 60 of Indias

population of 12 billion China Indonesia and Brazil also continue to show solid

growth in cellphone sales

The continued expansion of the cellphone industry in India stands in sharp contrast

to most other industries here Textile and software exporters are struggling Indias

brand new malls are sparsely populated and the sales of cars trucks tractors and

motorcycles have declined in recent months

But the cellphone industry recorded more than 10 million new subscribers in

December up from eight million a year earlier The industrys overall subscriber base

grew 48 in 2008 to 347 million customers

Rural customers have been hungry for mobile phones for a long time so demand

will remain unaffected

22

7 References

httpenwikipediaorgwikiCommunications_in_India

httpwwwicmrindiaorgcasestudiescatalogueBusiness20StrategyBSTR174htm

wwwvitalanalyticsin

httpwwwfonearenacommobile_phone_pricelisthtml

wwwmobile-prices-indiacom

httpwwwmobile-prices-indiacomNokia_Mobile_Phonesphp

httpwebebscohostcom

httpwwwindia-cellularcomMobile-Priceshtm

httpproquestumicompqdwebindex=8ampdid=1635821441ampSrchMode=1ampsid=3ampF

mt=3ampVInst=PRODampVType=PQDampRQT=309ampVName=PQDampTS=1264756239ampclien

tId=135690

20

bull The second phase complete with a tender for an additional 11049 sites has

yet to be started

bull The phased rollouts associated with the USO scheme require an additional

40875 mobile towers to be erected

bull Add this to the number of towers required for the five new 2G networks

additional coverage and capacity for existing operators and the introduction

of 3G networks and there is a huge demand for new cell sites right across the

country

6 Future of Mobile Industry

Demand Among Poor Farmers Keeps an Industry Growing as Other Sectors of the

Economy Are Jolted Rural customers have been hungry for mobile phones for a

long time so demand will remain unaffected by the global jitters said SP Shukla

chief executive officer of the mobile business at Reliance Communications India Ltd

Indias second-largest cellular company by number of subscribers

Even amid the global economic slowdown one Indian industry continues to boom

selling cellphones to the rural poor

Economists have slashed Indian economic growth forecasts for this year and the

stock market is in the doldrums But cellphone companies are signing millions of new

subscribers a month making India the fastest growing mobile-phone market in the

world There is no sign of a slowdown yet figures to be released later this month are

expected to show that new subscriptions in January reached a record 11 million

The demand for cellphones is coming mainly from rural consumers who typically

earn less than $1000 a year These buyers havent been affected by plunging stock

and real-estate prices or tighter bank lending since they typically dont own land and

dont borrow A large majority of them dont have access to regular landline phone

networks -- there are only about 40 million landline subscribers in India -- so once

cellular coverage comes to their towns or villages they scramble to get their first

phones

In the village of Karanehalli a cluster of simple homes around an intersection of two

dirt roads about 40 miles from Indias high-tech capital of Bangalore Farmer KT

Srinivasa doesnt have a toilet for his home or a tractor for his field But when a red

and white cellular tower sprouted in his village he splurged on a cellphone

While the way his family threshes rice -- crushing it with a massive stone roller --

hasnt changed for generations his phone has changed the way he farms He uses it

to decide when to plant and harvest by calling other farmers to get the best prices

21

for his rice coconuts and jasmine by calling wholesalers and to save hours of time

waiting on the road for deliveries and pickups that rarely come on time

Life is much better with the cellphone he said from his rice paddy in the shadow of

the new tower I bring it with me to the fields and anyone can reach me here

Mr Srinivasa like close to half the 800 people in his village uses Idea Cellular Ltd

as it was the first to bring them service He paid the equivalent of about $60 for his

Nokia phone and spends about $6 each month for service Like most rural users

Mr Srinivasa uses his phone to make voice calls -- he doesnt know how to text

message or to download emails On average rural Indians use their phones around

85 hours a month up 10 over the past year

The story is the same across rural India home to more than 60 of Indias

population of 12 billion China Indonesia and Brazil also continue to show solid

growth in cellphone sales

The continued expansion of the cellphone industry in India stands in sharp contrast

to most other industries here Textile and software exporters are struggling Indias

brand new malls are sparsely populated and the sales of cars trucks tractors and

motorcycles have declined in recent months

But the cellphone industry recorded more than 10 million new subscribers in

December up from eight million a year earlier The industrys overall subscriber base

grew 48 in 2008 to 347 million customers

Rural customers have been hungry for mobile phones for a long time so demand

will remain unaffected

22

7 References

httpenwikipediaorgwikiCommunications_in_India

httpwwwicmrindiaorgcasestudiescatalogueBusiness20StrategyBSTR174htm

wwwvitalanalyticsin

httpwwwfonearenacommobile_phone_pricelisthtml

wwwmobile-prices-indiacom

httpwwwmobile-prices-indiacomNokia_Mobile_Phonesphp

httpwebebscohostcom

httpwwwindia-cellularcomMobile-Priceshtm

httpproquestumicompqdwebindex=8ampdid=1635821441ampSrchMode=1ampsid=3ampF

mt=3ampVInst=PRODampVType=PQDampRQT=309ampVName=PQDampTS=1264756239ampclien

tId=135690

21

for his rice coconuts and jasmine by calling wholesalers and to save hours of time

waiting on the road for deliveries and pickups that rarely come on time

Life is much better with the cellphone he said from his rice paddy in the shadow of

the new tower I bring it with me to the fields and anyone can reach me here

Mr Srinivasa like close to half the 800 people in his village uses Idea Cellular Ltd

as it was the first to bring them service He paid the equivalent of about $60 for his

Nokia phone and spends about $6 each month for service Like most rural users

Mr Srinivasa uses his phone to make voice calls -- he doesnt know how to text

message or to download emails On average rural Indians use their phones around

85 hours a month up 10 over the past year

The story is the same across rural India home to more than 60 of Indias

population of 12 billion China Indonesia and Brazil also continue to show solid

growth in cellphone sales

The continued expansion of the cellphone industry in India stands in sharp contrast

to most other industries here Textile and software exporters are struggling Indias

brand new malls are sparsely populated and the sales of cars trucks tractors and

motorcycles have declined in recent months

But the cellphone industry recorded more than 10 million new subscribers in

December up from eight million a year earlier The industrys overall subscriber base

grew 48 in 2008 to 347 million customers

Rural customers have been hungry for mobile phones for a long time so demand

will remain unaffected

22

7 References

httpenwikipediaorgwikiCommunications_in_India

httpwwwicmrindiaorgcasestudiescatalogueBusiness20StrategyBSTR174htm

wwwvitalanalyticsin

httpwwwfonearenacommobile_phone_pricelisthtml

wwwmobile-prices-indiacom

httpwwwmobile-prices-indiacomNokia_Mobile_Phonesphp

httpwebebscohostcom

httpwwwindia-cellularcomMobile-Priceshtm

httpproquestumicompqdwebindex=8ampdid=1635821441ampSrchMode=1ampsid=3ampF

mt=3ampVInst=PRODampVType=PQDampRQT=309ampVName=PQDampTS=1264756239ampclien

tId=135690

22

7 References

httpenwikipediaorgwikiCommunications_in_India

httpwwwicmrindiaorgcasestudiescatalogueBusiness20StrategyBSTR174htm

wwwvitalanalyticsin

httpwwwfonearenacommobile_phone_pricelisthtml

wwwmobile-prices-indiacom

httpwwwmobile-prices-indiacomNokia_Mobile_Phonesphp

httpwebebscohostcom

httpwwwindia-cellularcomMobile-Priceshtm

httpproquestumicompqdwebindex=8ampdid=1635821441ampSrchMode=1ampsid=3ampF

mt=3ampVInst=PRODampVType=PQDampRQT=309ampVName=PQDampTS=1264756239ampclien

tId=135690