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Young Turks - New domestic brands storm the handset market

March 15, 2010
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Over the past year, the Indian handset market has been witnessing a gradual, though determined, invasion by rank outsiders, taking global heavyweights such as Nokia, Motorola and Samsung by surprise. The young turks include players such as Micromax Informatics, Intex Technologies (India), Lava Mobiles and the Essar Group-owned The MobileStore's brand, Ray.

These companies have a clear strategy: target low-end users with offerings at pocket-friendly prices. So far, the plan has worked, with some of the companies selling close to 1 million handsets per month in a market that sells close to 12.5 million handsets per month.

While the research and development for these domestic brands is being done in India, the handsets are being manufactured in either China or Taiwan. However, the domestic players now seem to be more inclined to manufacture the handsets indigenously as well.

Most of the newcomers have chalked out plans to set up manufacturing units in the country and have made large investments towards the same. The government's directive to block handsets with no, or false, international mobile equipment identity has, to some extent, created a demand for locally manufactured products.

These homegrown ventures are also looking at branding in a big way. Micromax Mobiles, for instance, is planning to invest Rs 1 billion in brand-building initiatives. Karbonn Mobiles, another new player, is spending a huge amount on cricket-based media advertising. It was a major sponsor of the South African club, Cape Cobras, in the Champions League, and was the main sponsor for the India-Sri Lanka ODI series last year.

tele.net takes a look at some of the new entrants in the mobile handset market and their plans...

In less than two years of launching its handset brand, Gurgaon-based mobile handset maker Micromax, has become the country's third largest GSM handset vendor, with a market share of 6 per cent after Nokia (62 per cent) and Samsung (8 per cent), according to research firm IDC. It has overtaken US-based Motorola, Inc. and South Korea's LG Electronics. Micromax claims to have sales ranging from 700,000 to 1 million mobile phones per month.

The company's first phone, the X1i, was launched in the second half of 2008. A first-of-its-kind low-cost phone suited for regions with irregular power supply, it offers a standby time of 30 days. This has been achieved by increasing the size of the battery to 1,800 milliampere-hour. At a modest price of Rs 2,150, the phone has been a big success in rural India.

For fiscal year ended March 31, 2009, Micromax registered a revenue of Rs 3.6 billion, with a sales profit of 10 per cent. The company expects a nearly fivefold surge in revenue for fiscal year 2009-10 and hopes to double that in the next fiscal year.

To fund its growth, Micromax, in January 2010, sold a minority stake to private equity player TA Associates for $45 million. The company is expanding into higher-spending urban areas and is launching high-end handsets –­ a combination that is likely to increase the average selling price from the current Rs 2,500 to Rs 3,500 per handset. The company currently sells handsets in the range of Rs 1,600 to Rs 16,000.

Micromax also intends to increase its presence in terms of the number of handset stores through which it sells its products, from 55,000 at present to about 80,000 by end-2010.

While Micromax has been manufacturing its handsets through contract manufacturers in China, Taiwan and South Korea so far, it plans to manufacture handsets from its facility in the industrial town of Baddi, Himachal Pradesh, in the near future. It intends to first conduct a test run by assembling about 5,000 phones by May 2010 and then scale it up to about 50,000 phones by September 2010.

Micromax currently has tie-ups with TATA DOCOMO, Bharti Airtel, Bharat Sanchar Nigam Limited, Reliance Communications, Tata Teleservices and MTS for handset bundling, and is in talks with Aircel and Idea Cellular.

The handset maker will roll out a pilot application store within the next two months. "We will be using our in-house platform and applications for the store. We are incubating a complete application store, which can be accessed via all Micromax phones," says a company official.

Micromax is keen to expand overseas as well. It is looking at four regions –­ SAARC, the Middle East, Africa and Latin America. It is currently operational in Nepal and will soon be active in Bangladesh as well.

Karbonn Mobiles
Since launching its first handset in March 2009, Karbonn Mobiles has sold 3 million handhelds. This figure, say industry analysts, may be an insignificant number when compared to the market size, but for a newcomer, it spells promise.

Karbonn Mobiles is a joint venture between the Delhi-based Jaina Group and Bangalore-based UTL Group. The Jaina Group started as a distributor of mobile handsets about 15 years ago. It is a distributor for HTC in South Asia (including India), as well as for Motorola and LG in India. UTL is an ICT solutions company involved in setting up telecom and e-governance networks and providing solutions for the transport sector.

Karbonn has about 30 handsets on offer. These include touchscreen, dualSIM and multimedia phones, both GSM and CDMA. The latest additions to its product line are two feature-rich handsets –­ the K500 and KC425 –­ priced at Rs 3,290 and Rs 2,990 respectively.

While Karbonn's multimedia phones address the fast saturating urban markets, handsets equipped with dual-SIM cards and longer-life batteries are clearly targeted at the rural market.

Going forward, the company plans to launch three to four models every month across different segments and price points. The vendor is currently sourcing handsets from original design manufacturers in China, Taiwan and South Korea.

For building brand awareness, Karbonn has earmarked an investment of Rs 1 billion for financial year 2010-11. The company sponsored the India-Sri Lanka ODI series, which gave it muchneeded visibility. Currently, the campaign for Karbonn Mobiles, which highlights the dual-SIM card option, is running extensively on all national and regional television channels. For 2010-11, the company plans to increase its ad budget to s 1.5 billion from Rs 1 billion. Besides, the vendor intends to set up 5-10 exclusive Karbonn stores across the country.

The company also wants to enter the high-growth markets of Africa and the Middle East within the second quarter of 2010-11. It has already begun operations in Bangladesh, Sri Lanka and Nepal, and is targeting revenues of Rs 24 billion in 2010-11.

Intex Technologies
Until recently, Intex Technologies' handset portfolio consisted largely of dualSIM handsets. Going a step further, the company launched a triple-SIM (GSM + GSM + CDMA) phone, the IN 5030, in February 2010.

The Delhi-based mobile phone and electronics company launched its mobile phone business in 2008. According to Naved Chaudhary, head, marketing, the company is currently selling more than 100,000 handsets every month. "The mobile phone portfolio will be more robust in the coming year and we are planning to launch 8-10 models." Intex started its mobile phone operations from Haryana and its biggest markets at present are Madhya Pradesh, Uttar Pradesh, Haryana and Punjab. The company is also on an expansion spree in Gujarat and is aiming to double its mobile handset sales in the state. It currently sells around 12,000 handsets in Gujarat, which accounts for 8- 10 per cent of its total sales.

Intex sells its handsets through Intex Squares, its franchisee-managed stores, as well as through its vast network of distributors and retailers. The company currently has 11 Intex Square outlets and the number is expected to touch 100 by December 2010. Intex also has about 180 distributors for mobile phones, and is planning to scale this up to 300 over the next few months. In addition, there are about 90 resellers attached to each distributor. The vendor has also allocated a marketing budget of Rs 100 million for its mobile phone business.

For 2009-10, Intex Technologies is expecting a turnover of Rs 6.5 billion. While it currently has a 1.5 per cent share of the Indian handset market, it is targeting a share of 5 per cent by September 2011.

Lava Mobiles
Based in Uttar Pradesh, Lava Mobiles is also a newcomer in the mobile handset market. The company is promoted by three entrepreneurs –­ Hari Om Rai, Sunil Bhalla and Shailendra Nath Rai.

The company launched its mobile brand in August 2009 and currently offers nine handsets in the range of Rs 2,000 to Rs 6,000. It aims at a national presence with an emphasis on India's tier II and smaller towns.

The vendor is also planning to invest in an indigenous manufacturing facility. "Currently, we are witnessing a monthon-month growth rate of 45-55 per cent in absolute value terms," says Rai.

Videocon, an established name in the consumer electronics industry, is the latest to join the handset fray.

After a soft launch of mobile sets in southern and western India in early 2010, the company is aggressively planning to tap the northern and eastern markets within the next two months.

Currently, Videocon offers 12 models in the price range of Rs 1,400 to Rs 15,000. Identifying the huge demand for dual-SIM phones, the vendor is looking to develop more handsets in this space. It is likely to launch 15 more models in the next two months.

Videocon, which recently started its direct-to-home service and launched mobile services in the Mumbai circle, expects its handset business to make a significant contribution to its overall turnover in the near future.

Others Riding the growth in the low-cost mobile handset segment, several new players like Gee Pee Infotech, Simoco Mobiles, The MobileStore, Zen Mobiles, Movil Mobiles, Mirc Electronics and Airfone entered the market between 2008 and 2009.

Zen Mobiles, a Delhi-based firm, was established in November 2008. Part of the Teleecare Group, the company has been adding more than 225,000 customers per month and plans to double the number by June 2010. Zen has already covered 60 per cent of the country and is aiming at a panIndian footprint by mid-2010. It also aims to achieve a sales turnover of Rs 600 million by June 2010.

In what was its first venture into the mobile phone manufacturing space, The MobileStore announced the launch of its low-cost handset range under the brand name Ray in April 2009. The vendor has set itself a revenue target of Rs 2 billion in the first year of launch. The company currently sells six models, all of which are in the below Rs 4,500 price range.

Aside from these companies, there are lesser known players like Gee Pee Infotech and Simoco Mobiles, which are planning to launch several multimedia and cheap handsets over the next three months.

Kolkata-based Gee Pee Infotech sells handsets in the Rs 1,000-Rs 6,000 price range. Going a step lower, it plans to unveil colour handsets for Rs 500 in April 2010. The firm has scheduled the Kolkata launch of the phone for the Bengali new year. "We are targeting the rural population," says Bijay Agarwal, managing director, Gee Pee Infotech.

Simoco Mobiles, another Kolkatabased mobile phone manufacturer, currently sells over 45 models, most of which support dual-SIM connections. It plans to soon launch a handset that supports two GSM connections and a CDMA connection at a price of Rs 5,500.

The company manufactures only two handsets in Kolkata; the rest are assembled and imported from China. Simoco has more than 100 distributors and 60 service centres across the country.

Despite their regional reach, these players seem to be doing well. Simoco has reportedly received export orders for handsets from service providers like Vodafone Essar. It expects to sell 60,000-70,000 handsets per month going forward.

Apart from these newcomers, there are some relatively old Indian brands such as Spice Mobiles, Panasonic, HFCL and ITI operating in this space. All put together, the Indian handset market is clearly buzzing with homegrown ventures and a whole new range of mobile models.

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