New Telecom Buzz

India’s mobile revolution enters a new era, with a rush to market cheap handsets under local brand names.

By the time you read this, India would have achieved the distinction of being the lone country where mobile phone handset brands outnumber that of bath soaps. For every Lifebuoy or Liril, there’s a Lava or Lemon. India is the world’s fastest growing telecom market, with an official count of 450 million telecom connections and some 15 million being added every month. This doesn’t mean poverty is history now, since multiple Sim cards are common and operators are suspected of assigning multiple numbers to a single subscriber under the guise of ‘plan’ changes (with an inbuilt number-divert facility). But it is a consumer revolution of breathtaking proportions all the same. Even the dhobi’s flunkie now has a phone, as the popular cliché goes.

The story now, however, is how mobile manufacturing is getting crowded. Here’s a cross section: Ajanta, the world’s largest clockmaker, wants a piece of the mobile action; Onida, envious of a neighbourly business, is hitching its future on mobiles; Pune-based Canpex group, and the world’s largest manufacturer of guanidine nitrate and hydrogen cyanamide (no, we didn’t make that up), now sells a mobile brand called Byond.

According to some estimates, hitherto unknown brands such as Karbonn, Lava, Micromax and Maxx, that have flooded the market, sold some 6.5 million units in 2009. That’s nearly a tenth of the market. Considering that Nokia had a near monopoly not too long ago, that’s quite remarkable.

If there’s a bee in the bonnet of big boys Nokia, LG and Samsung, it’s them. The new players are playing the features game, together with penetrative pricing. Some of them sell for as little as Rs 1,200, despite being loaded with all the regular add-ons, from large colour screen and 1.3 megapixel camera to an FM radio and MP3 player, and then some. In contrast, Nokia’s cheapest phone in India, the 1202, is priced about Rs 100 higher, but is a no-frill model with a black & white screen.

With China having turned all existing notions of what should cost how much topsy-turvy, it’s now a business simple enough for anyone to give it a shot. Grab hold of a Chinese handset maker and strike a bulk deal to get handsets at about Rs 800 apiece. Whether the phone is a ‘lemon’ or not doesn’t matter. You need a distribution network and the rudiments of bottom-of-the-pyramid branding, and you’re ready to fly (er… another new brand as it turns out, though not local).

So, how well are these newcomers doing? The curiously named Lemon Mobile is a good place to begin the search for our new fortune seekers. Located deep inside the industrial bowels of Noida, Lemon’s head office resembles a chaotic call centre operating in a basement under renovation. Lemon is run by Mohinder Singh Malik, a partner in the business and also co-founder of a telecom instrument supplier called Pacetel (clients: Bharti, Vodafone and Idea). To him, Pacetel’s market entry was as obvious as ‘Open sesame’.

Somewhat suspicious of the motives of a journalist prowling around the office, Lemon’s marketing manager Trailukya Dutta asks to be shown a copy of Open. Pleased by the discovery that we aren’t there to ask for ads, Dutta parts with information with the caution of a wildebeest crossing a river full of crocodiles. “Semi-urban and rural markets are our priority,” he says, “In a market where rival service providers are competing on tariff, many rural consumers use multiple Sim cards to take advantage of lower rates at different times of the day. That’s why having a dual Sim GSM-CDMA is very important. By 2009-10, we plan to sell close to 1.5 million phones. The key is to give the customer a fully loaded phone for around Rs 2,000.”

But what about reliability and product differentiation… and why Lemon? “When everyone including Nokia is importing handsets from China, and probably getting them made in the same factory as us, why should there be a problem?” he asks. As for the brand name, it was chosen to cue something ‘fun, vibrant and auspicious’. After all, the little citrus orb in India isn’t what it is in the West (there are even film songs written as odes to it). “For product differentiation,” adds Dutta, “we do a lot of work at our in-house R&D centre.” Asked for details on what R&D is in progress, he replies, “market research”.

A few kilometers away, housed in a relatively swankier office, another spinoff of Pacetel is also trying to strike it rich with cheap handsets—under the brand Lava. “There is a genuine demand-supply gap at the bottom of the pyramid, and no company has managed to fill that gap in an organised manner. That’s where we see an opportunity,” says Praveen Srivastava, the articulate country head of Lava Mobile.

But in a country driven by aspirations, would an unknown face stand a chance against global names? Srivastava reasons that when it comes to mobile phones, India’s low-income consumers are feature conscious rather than suckers for big brands. “Often a customer enters mobile telephony with Nokia’s entry-level model because his relatives have told him it’s the most reliable phone,” he observes, “But when he loses his fear of technology and wants to explore the possibilities further, he starts looking for features. Good music, camera, storage etcetera. That’s when the likes of Nokia become unaffordable.” Lava’s alternatives sell in a range of Rs 1,400 to Rs 4,700.

While Nokia sells nearly two of every three handsets in India, its share in the Rs 2,000–4,000 bracket is only 40 per cent, Srivastava points out. As for differentiation, Lava sells on music quality. “We want to own the music phones category,” he proclaims. Plus, soon-to-come solar phones could give it an added rural edge.

Also launched earlier this year, Karbonn claims to be the most successful of all pyramid basement players, with nearly 4.5 million units sold and a market share of 8 per cent in six months flat. “By the end of next year, we would have easily increased our marketshare to more than 15 per cent,” boasts Biju Menon, business head of Karbonn, a joint-venture between yet another telecom vendor, Bangalore-based UTL, and a Delhi-based marketing firm called Jaina.

But could these low-cost startups be setting off another round of rogue entrepreneurship? Remember Kabeer Mulchandani of Akai TV, the man who crashed TV set prices in the mid-1990s and started a price war? His brand collapsed, leaving his customers fuming, and he himself is now in jail in Dubai for running a Ponzi scheme in the real estate sector.

The consumer who seeks reliability demands a mark of trust, which is what a brand is supposed to be—an assurance. Lava’s ad budget for 2009-10 is Rs 60 crore, which is huge for a single brand. But brands are rarely built overnight.

Lemon, Lava and Karbonn would have to show that they’re in for the long run, and that means offering credible after-sales service assurances. Menon claims Karbonn matches the best on quality. “The resale value of our phones in the second-hand market is very good,” he claims, explaining that the brand’s prices are low only because the middleman has been cut out of the system. Disintermediation. Ugly word, clever strategy. Often sour. Always a challenge.

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TR Vivek