Marketing strategies of Indian Handset (mobile equipment) manufacturers - to compete against Nokia, Samsung, etc.

The Indian mobile phone revolution is incomplete without the mention of local handset companies, which are responsible in a big way for taking feature-rich phones to the masses. Companies such as Micromax, Lava, Lemon Mobiles, Karbonn etc. India’s mobile handset as a whole has grown by 15% to Rs. 33171 crores. Top 10 manufacturers have contributed Rs. 23603 crores or 70% of the total revenues.

Top 10 mobile handset manufacturers by revenues in 2010-11:

Manufacturer	Revenues in crores (INR)
Nokia	12,929
Samsung	5,720
Micromax	2,289
RIM	1,950
LG	1,210
G’Five	1,326
Karbonn	1,004
Spice	920
Maxx Mobiles	745
Sony Ericsson	690

So, the time when only Nokia, Samsung (International player) ruled the market has gone, now they are finding it hard to compete in the continuously growing dynamic market. And on the other hand the new Indian manufacturer like Micromax, Karbonn, Spice, Maxx mobiles are eating up the share of the market at the quick pace reporting robust sales.

Marketing strategies opted by Indian handset manufacturers:

Low Price: The simplest market winning strategy is to offer the latest technologies at comparatively lower price. The general behavior of Indian consumer show that, they prefer less known brand to a big player provided they carry the latest technology at lower price. The Indian handset manufacturer utilizes this strategy to their best. The aspiring and primitives are enticed by brands which provide value for money offering and also have rich mobile experience.

Multiple Sim Slots: The steep growth of local mobile phones is almost entirely on the back of so-called dual-sim phones (even triple-sim), which allowed thrifty consumers to have two numbers on single device and effectively exploit plunging tariffs in a cut-throat mobile services market.  In India, mobile plans are mostly prepaid and, thanks to an ongoing price war, among the cheapest in the world and getting cheaper. Consumers constantly shop for deals and often wind up with three or more accounts—nearly 100 million Indians have multiple cell numbers, estimates investment bank Macquarie. To switch among numbers, cell phone owners used to have to swap SIM cards, which is eliminated with multiple sim phones.

Research and Development: In the global scenario companies spend billions of dollars in their research and development and it is no hidden fact that overall performance of tech companies is directly correlated to their R&D investment.

With a well-defined product vision and an R&D set-up to support it, Indian handset manufacturer successfully generated innovative handsets that can revolutionize the telecom consumer space. Due to thorough understanding of the Indian market as well as consumers local manufacturer are coming up with innovative handsets to compete in the market. Local companies are flooding the Indian market with multiple options aimed at different consumer segments. Some of them are:-

ü  Single click access to popular social networking sites like Facebook and Twitter.

ü  Low priced phone with QWERTY keypad.

ü  Low priced phone with touch screen

ü  The 30 day standby battery life on mobile sets was a big success especially in the rural areas where power failures are common.

ü  Handsets with switching networks option (GSM-CDMA)

ü  Mobile handsets with 3D motion gaming technology – this has been targeted at the youth taking into account the growing gaming culture.

Branding: Branding is to differentiate from other sellers. Local manufacturer uses the all possible medium to advertise their products like:

ü  Many brands sponsor big sports events like I.P.L, IIFA, Cricket World Cup to attract youths.

ü  Use print media and Social networking site.

ü  Use catchy advertisements by showcasing celebrities as Akshay Kumar is brand ambassador of micromax.

To sum it up local manufacturers have won the initial battle by registering their brand on the on the minds of consumer but they still have a long way to go, they have to gain the trust of consumer by providing innovative products with superior quality and at competitive price.

Written by :  Ankur Bhalla
                    MBA TM (I)
                        SITM

FALLING ARPU – WHAT IS THE SOLUTION?

Once the poster boy of India’s economic growth, the Telecom Industry is now at the crossroads. From the highs of late 1990s till around 2008, the telecom sector has fallen victim to its own success. The “subscriber linked criteria” for gaining more and more spectrum has been a boon as well as a bane for the Industry.

In the first decade of the 21^st century, there was tremendous growth, with high revenues and profits. It was no coincidence that when India was clocking high GDP growth rates the telecom industry was also growing beyond one could imagine. But that very criterion is hitting back. After adding so many subscribers, a saturation level has been reached. For the new acquisitions, prices had to be lowered to such levels not seen anywhere else in the world. There were literally prices wars. The problem was that in order to acquire/poach new subscribers, the tariffs were lowered in a hope that it will translate into more talking time which was not the case though. COAI commissioned a study from PwC on the Indian Telecom Industry scenario. The report says that the minutes of usage (MoU) per user have fallen from 465 (2007) to 369 (2011). So this has actually had a negative effect on the revenues due to falling tariffs. Now even the number of subscribers added (2011) has been witnessing a sharp decline compared to the previous years. In July 2011, new subscribers added were only around 7.6 million, the lowest since June 2007.

In addition, the industry had to also bear the cost of implementing Mobile Number Portability — estimated to be around Rs 500 crore, and an equal amount is expected to be invested to satisfy the Government's security concerns. Now there are so many players in the industry, huge pressure on the margins affecting the big players as well as the small players, falling MoU, network congestion, falling ARPU etc. The challenges faced are unique and has many facets. Add to that the biggest concern is that the growth story has not completed a full circle wherein the telecom revolution has not yet touched the lives of more than half the population of our country. The question is what can be done to revive the industry?

1)    First of all this requires the operators and regulators working together.

The industry is banking on the New Telecom Policy to be unveiled later this year. As per the PwC report, the operators in India pay 19-28% of their annual revenues to the government in the form of licence fees, spectrum charges and service taxes. The Government earned Rs 1.36 lakh crore from the telecom sector in 2010, compared to Rs 9,100 crore in 2004. The NTP-2011 can be framed in such a way to reduce the taxes and levies, so that the operating costs come down. This does not impact ARPU directly but will have an effect on the cost per user (margins) which will in turn change the way operators plan their investment for example setting up of rural infrastructure which is in tune with the government’s theme of inclusive growth.

2)    Low spectrum prices.

The recently concluded auctions of 3G spectrum and BWA have put tremendous pressure on the profit margins. The government earned nearly Rs 68,000 Crores from the 3G auction and Rs 38,000 Crores from BWA auction. As per the current regulations one Telco cannot have a stake of more than 10% in another Telco. If this clause can be removed or in other words if the market structure for mergers and acquisitions can be liberalized, it would lead to consolidation in the industry thereby cooling off the price wars. As I am penning down this article, TRAI is acting on an exit policy for those operators who have either met the roll out obligations or not received the spectrum. This will lead to an increase in the spectrum bank of DOT. The demand supply market forces will make sure that the spectrum prices will come down. This decision is endorsed by the government as in the current year’s budget; it has estimated the non-tax revenues as Rs 13,000 Crores. So the exit policy is a success, nearly 200 MHz of spectrum will be available for sale and hopes to cover the non-tax revenue component.

3)    Increase Data services and customer quality experience.

India’s internet and broad band penetration is very low at 1.6% and 0.9% respectively. This presents immense potential for the telcos. This will definitely require investments but as mentioned above if the government policies are amended, this will translate into more funds available for the telcos. The point to be noted is the cascading effects of government’s intervention. Also as per a report by research firm IRMB, customer pays on an average Rs 389/month, for mobile net services, which is good news for the telcos as ARPU is declining rapidly. Instead of concentrating on increasing the subscriber base, the telcos can focus on increasing the quality of services. It is more of convenience and satisfaction to the customers, making them habitual of the services and eventually driving usage.

As we have seen above, government’s policies and interventions are paramount for the revival of the Telecom Industry. If the government promises to do what it always claims to be as a “business enabler”, then the stage will be set for another round of telecom revolution.


L.KISHAN CHAND
Class of 2013

Latest Telecom News (1st Nov - 8th Nov)

1.  Infotel acquires stake in Extramarks Education.

RIL’s Infotel Broadband has acquired a 38.5% stake in Extramarks Education Pvt Ltd.

Infotel Broadband Services Ltd is a subsidiary of RIL. Extramarks deals with school education and digital learning. This investment will definitely help Extramarks in further developing services and wider market penetration.

2.  India’s internet users top 100 million in Sept.

A survey conducted by Internet and Mobile Association of India (IAMAI) and IMRB, has found that the number of internet users in India has crossed 100 million (112 million), registering a growth of 11% against last year. This number is poised to reach 121 million in December 2011. With this India has become the third largest internet market in world

Findings

a.    Out of the 28 million active internet users in 30 cities, 89% use the internet for Email, followed by 71% for social networking sites.

b.    Of the 75% urban usage, 21% school children, 27% college students, 27% young men.

c.    Among India’s cities, Mumbai has the highest number of active internet users.

3.  Europe IT spending to drop – Gartner.

IT spending by companies in Western Europe will fall this year and grow only modestly in 2012 as their governments cut back on expenditure and investments due to Euro Zone crisis.

Gartner has forecasted that the enterprise spending on IT will fall 1.8% this year to 494.8 billion Euros and grow at 1.5% next year.

           Government’s IT spending will decline 4.8% in 2011 and 1.8% in 2012.

4.  Paymate and Nokia tie up for NFC.

Paymate has developed a unique and cutting edge NFC technology that enables to perform transactions by using a simple tap.

With the recent launch of Nokia’s NFC enabled phones, Paymate has partnered with Nokia to showcase NFCs capabilities to the Indian Market. NFC (Near Field Communication) uses radio frequencies to allow NFC enable phones to exchange information in real time with a simple tap of the phone against an NFC touch point.

5.  Airtel to disconnect mobiles lying inactive for 60 days.

Bharti Airtel has announced that it will start disconnecting subscribers who are idle for 60 days. This move comes in response to the DOT’s order for tightening the allocation criteria. And also Airtel has been facing a shortage of numbers.

These disconnected numbers will now be available for new users.

About 12% of Airtel’s 180 million subscribers have been found inactive. This is lower than the industry average of 30%

Implications

a.    Users with life time valid prepaid cards will be affected the most as now they have recharge their mobiles every two months instead of 6 months.

b.    Users with multiple SIMs may also be affected.

Users using a SIM card for giving it to a close friend who visit them from other companies.

6.  Top 4 IT companies on a hiring spree.

Cognizant Solutions juggernaut continues as the number of employees added at the end of the second quarter touching 12000.

This addition was partly aided with the acquisition of Core Logic with 4000 employees. But still Cognizant on its own was able to add 8000 employees which are just 262 short of what Infosys added.

           India’s leading IT firm, TCS added around 12580 employees. These figures show that
           business demand is still strong. Unlike the crisis in 2008 where the entire systems
           collapsed, the current crisis in Europe has not risen to such alarming magnitudes. The
           slow uptick in the US as evidenced by a drop in jobless claims and this has given  
           confidence to the IT companies to go ahead on a hiring spree.

       

   7.    DOT slaps penalty on Airtel and Tata Communications. 

DOT has slapped a hefty fine of Rs.50 Crores on Airtel and Tata Communications for allegedly violating international long distance telephony licence conditions.

This notice was issued on Friday and the operators are given 15 days to pay up.

Events

a)    In 2007, both the above operators entered into separate agreements with SingTel (Singapore based Telecom Company) for offering long distance communication services.

b)    International long distance operators are allowed to sell leased line to other companies, in this case SingTel used the leased lines from Airtel and Tata Communications to further resell bandwidth to its enterprise customers in India.

            c) Now DOT alleges that SingTel billed and collected revenues from India without  
                licence. DOT has imposed the fine on the two operators for failing to detect the
                misuse by SingTel.

8.       Brazil Telecom Investments To Reach New Heights

   

              New investments in Brazilian telecommunications industries are set to reach 70 billion Brazilian Real ($41.42 billion) over the next five years on growth in the mobile phone, cable and digital TV sectors, and because of planned infrastructure work for Brazil's hosting of major sporting events.

9.   Iphone To Be Launched In HK, South Korea By Nov ‘11 End

Apple said that it will be launching iphone in Hongkong and South Korea by the end of November ’11, thereby giving them an opportunity to preorder the device. Apple will be coming up with the latest version of iphone. It will definitely add to the sales of iphone after its success in other developing and developed countries.

10.   OnMobile Q2 net doubles on non-operating income

OnMobile Global Ltd. said its second-quarter net profit more than doubled, helped by a boost in other income even as costs rose faster than revenue and tax expenses surged. The Bangalore-based company, which provides value-added services such as caller tunes and music downloads to mobile phone companies, said net profit is increasing as we are walking towards more application based service.

11.   China Mobile lures 5 million new iPhone users with Wi-Fi, rebates

China Mobile has yet to convince Apple to partner on an iPhone that supports its proprietary TD-SCDMA 3G network, but that hasn’t stopped the carrier from attracting customers to the device. In fact, China Mobile added 5 million new iPhone users in just four months, and it now serves a total of 9.5 million iPhone users, Bloomberg said. Each of those customers can use text, voice and 2G data, and all of the iPhone models it sells are unsubsidized. That may sound like a turnoff, but China Mobile has increased its iPhone user base by building out a nationwide Wi-Fi network to make up for its 3G shortcomings, and the carrier is also offering rebates worth as much as $440. The carrier plans to add an additional 1 million hotspots throughout China during the next three years, too. China Unicom has been an exclusive iPhone partner in China since 2005 and while it has less 3G subscribers than China Mobile, it is able to offer a 3G-capable iPhone because it operates a WCDMA 3G network.

12.         Apple positioned for smartphone fightback

Apple is well placed to retake the crown of top global smartphone vendor in the fourth quarter due to extending its range into lower price points, a Juniper Research analyst predicts. The data firm notes that South Korean vendor Samsung topped the pile during the third quarter, shipping 22% of 115 million global smartphones sold compared to 15% for Apple. Junipers points out that Samsung benefitted from continued strong sales of its flagship Galaxy S II model, and believes its future portfolio will shake up the smartphone market with new designs and form factors. However, research analyst Daniel Ashdown tips Apple to recover in the fourth quarter as sales of its iPhone 4S accelerate. “While the 4S is essentially an iPhone 4 with hardware upgrades, Siri is going to be a killer app for Apple,” he states, adding that Apple’s decision to push previous iPhone models down the value chain “positions the company’s handsets at a range of price points, without losing their premium image.”

13.   Returned Android phones costing operators $2bn a year

Customers returning malfunctioning Android phones for repair or replacement are costing operators as much as $2 billion per year, claimed mobile device management firm WDS. By analysing 600,000 technical support calls it handled over the last 12 months, WDS found that 14% of calls concerning Android-powered devices related to various faults in the device has started to hurt operators.

14.   Ambani brothers in telecom talks

India's Ambani brothers--once caught in a bitter feud over their massive family empire--may now be ready to work together again, with Mukesh's Reliance Industries Ltd. in talks to lease telecom infrastructure from Anil's Reliance Communications Ltd. for its new wireless broadband business.

15.   DoCoMo targets 30m LTE subs by 2015

                Japan's NTT DoCoMo has laid out is expansion plans for the next few years, including reaching 30 million LTE subscribers by 2015.  The company's medium-term plan, released today, also details ambitions to nearly quadruple its total smartphone customer base to 40 million by fiscal 2015. This compares to an estimated 1.3 million subscribers to its Xi LTE network - and 10.2 million total smartphone customers - for FY11. DoCoMo to increase total packet revenues by 1.5 times over the period, but this is dwarfed by an expected 12-fold increase in wireless traffic growth. To accommodate for the deluge, the company aims to increase its use of femtocells and Wi-Fi, and more than triple the amount of hotspots for the Mzone public wireless LAN service. DoCoMo hopes to achieve around 60% population coverage for the Xi network in FY12, 80% in FY13 and 98% in FY14

16.   ZTE tops global CDMA base station market

ZTE Corporation,  a publicly-listed global provider of telecommunications equipment and network solutions, said that it has become the global leader in the CDMA base station market, with a 32.6 per cent share in first half 2011. The CDMA market global has grown in recent years, especially in Asia Pacific, where it has expanded rapidly. This, coupled with a loss in market share by several established North American CDMA suppliers, prompted ZTE to seek new opportunities in CDMA markets across the globe. Through these efforts, the company has acquired leading market share in several emerging nations such as, China, Indonesia and India. It also has achieved significant breakthroughs in North America.

17.   DragonWave to acquire Nokia Siemens' microwave transport business

   Telecommunications equipment vendor Nokia Siemens Networks said that
   Canada's DragonWave Inc. is buying its microwave data transmission business for
   EUR10 million in cash and EUR5 million in shares. DragonWave, a wireless
   equipment maker, would also become a preferred supplier and will jointly develop
   future technology with NSN, it said.

18.   France Telecom buys 34% stake in Skyrock's Web ops

Orange, a unit of French telecommunications giant France Telecom, said it has acquired a 34.15% stake in Cascadia, a company that holds the web operations of French radio station Skyrock, for EUR14 million. This acquisition is another illustration of the role Orange intends to play on the web.

19.    Apple loses to Spanish minnow; Samsung takes smartphone lead

Apple had its wings clipped in one of a series of patent lawsuits this week, with a small Spanish computer manufacturer overturning a ban on its Android tablet PCs, and Samsung shipping more smartphones than the US vendor in the third quarter. In what is being billed as a David versus Goliath battle, Spanish computer maker Nuevas Tecnologías y Energías Catalá (nt-k) won court backing to re-start sales of an Android-based tablet PC in the country, over a year after Apple successfully had shipments stopped. The Spanish firm is incensed Apple also pursued a criminal case against it, and says it will now seek compensation for lost earnings and damage to its reputation. More worrying for Apple is that the Spanish court’s decision casts doubt on its main argument in a similar patent battle with Samsung that has already resulted in the South Korean firm’s Galaxy Tab 10.1 being banned in Germany. Despite the pressure on its tablets, Samsung topped the 3Q smartphone shipments chart with 27.8 million units sent out the door compared to 17.1 million for Apple, and Nokia’s 16.4 million.

20.    Alca-Lu slashes costs, trims guidance

Alcatel-Lucent chief Ben Verwaayen promises radical action to cut costs by €500 million ($689 million), as he lowered fourth quarter predictions on the back of what he called an unsatisfactory 3Q11. The equipment vendor’s earnings are heading in the right direction - net profit hit €194 million in 3Q11 compared to €25 million in 3Q10 - however revenue fell 6.8% year-on-year to €3.7 billion as sales in North America, Asia Pacific and Europe faded, and the cost of sales hit €2.4 billion.

21.    Barnes & Noble unveils Nook Tablet

Barnes & Noble Inc. unveiled the Nook Tablet, a device the bookseller will begin to sell in its stores next week as it targets core readers and takes aim at other hot tablets on the market. With the launch of the Nook Tablet, Barnes & Noble is aiming to court customers during the key holiday season, competing in a space that includes Amazon.com Inc.'s recently announced Kindle Fire and Apple Inc.'s iPad. Barnes & Noble's Nook Tablet will retail at $249, with other features including a free cloud service, nine hours of video battery life and access to the Nook newsstand and comics. Amazon's WiFi-enabled Kindle Fire retails for $199, while iPads have a starting price of $499. Weighing less than a pound, the Nook Tablet is physically similar to the company's Nook Color, and includes 16GB of storage and the capability to expand memory using a microSD card. It offers up to 11.5 hours of reading, uses the Android operating system, has Wi-Fi capability and a built-in microphone to read and record stories. Pre-loaded apps include Netflix, Hulu Plus, Pandora and Sudoku.

RURAL TELECOM (INDIA) - mHEALTH AND mEDUCATION

Out of the eight Millennium Development Goals, adopted by 189 nations, four are focused towards Health and Education. This reinforces the fact that health and education are the driving force in development of any nation and if issues in these areas are not addressed, they become hindrance in the economic development. India can be broadly divided into two segments, developing and underdeveloped. As per the census of 2011, 72.2 percent of Indian population resides in rural areas forming a large chunk of underdeveloped India. For transforming the rural India, technology needs to be in the driver seat. Telecom helps to reach in every corner of a nation and goes hand in hand with technology. Telecom’s answer to the burning issues of health and education is mHealth and mEducation respectively.

MHealth is the application of emerging mobile communications and network technologies for health care system. It involves the use of mobile computing, medical sensors and communication technologies for health care. A large segment of the patient population can be treated in their homes and communities, with access to expert care, through mobile technology. As patients consume more resources when they are in hospitals, this will have a significant impact on health economics. In India 33 percent of people living in villages have mobile phones. Hence this becomes a highly untapped segment for the Indian telcos.

Airtel has recently released its mHealth services, which is a SMS based health alert. These alerts are provided by mDhil Health Info Services Pvt Ltd, a Bangalore based start-up that provides healthcare information to the general Indian public mainly through text messaging, but increasingly through mobile web and digital content. Airtel offers 14 different SMS health packs such as Women’s health, Men’s health, Cardiac care, Diabetes etc. Irony is that mEntertainment and mFinance create stand alone products supported by lots of advertising dollars whereas mHealth remains more of a value added service.

Vodafone along with UN Foundation, the Rockefeller Foundation, cofounded mHealth alliance in 2009 to harness the power of wireless technologies to improve health outcomes in low and middle income countries. Soon after its launch, the mHealth Alliance welcomed GSMA and the U.S. Presidents Emergency Plan for AIDS Relief (PEPFAR) as Founding Partners. In 2009 Vodafone created the Vodafone Health Solutions business unit, which is located within its Global Enterprise division. The unit is tasked with developing a global portfolio of health-related services. So it was not a surprise for many when Vodafone sold its 5.5% of Indian operation to Indian medical services provider Piramal Healthcare in August 2011. Telecom operator Aircel has tied up with the Apollo Hospital Group to launch a medical consultation on the mobile. The service is called Aircel Apollo Mobile HealthCare. A tie-up between the two companies is not surprising, particularly since the Reddy family of the Apollo Hospitals group owns around 26% stake in the telecom operator.

On the similar lines, Tata Docomo launched Sparsh – a value added service on sexual & reproductive health related issues for its GSM Mobile service subscribers in India. The content of the service is extensively accurate and certified by FPAI (Family Planning Association of India), one of India’s largest sexual and reproductive Health NGO. Tata Indicom  launched “Doctor on Call” service in partnership with Healthcare Magic, an Accel Partners funded Tata Indicom, to offer consultation services for Acute and chronic emergency situations. HealthcareMagic connects medical professionals with those seeking consultation: callers are offered consultation with doctors via phone, and the Internet. On the phone, a doctor registers the personal data and medical history of the subscriber, diagnoses the cases, based on whether the issue is acute, chronic and emergency

For the Education sector, mobile connectivity provides an opportunity to offer new ways of teaching and learning that ultimately will improve performance and results whilst at the same time open up new markets for mobile operators across the world. Mobile will increase access to up-to-date materials, will enable collaboration and strengthen learner engagement. All these objectives can be achieved via mEducation. Tata Indicom in 2008 partnered with SNDT Women’s University, Atom Tech (Any Transaction on Mobile), Mumbai, & Indian PCO Teleservices Ltd to develop and disseminate mobile education, an additional vehicle in distance learning, to reach the masses for remote teaching and learning in rural communities and physically challenged. Under this model, the mobile phone undergoes a metamorphosis—from a device that allows you access to voice and text messaging, it transforms into one that helps you access accredited educational content, take mock tests on the move, regardless of geographies or physical constraints.

A new VAS called ‘Tutor On Mobile’ (TOM) was launched by VOICETAP and Tata DOCOMO in July 2011. This VAS was designed to help students to access education information when they are on move. ‘Tutoron Mobile’ (TOM) is loaded with premium educational content and easy learning mechanism. With the help of Knowledge conference call and monetizing their expertise’s experts can provide answers worldwide. The content provided by ‘Tutor on Mobile’ (TOM) are in the form of video, text, images, live interaction, podcast etc.

Nokia and Bharti Airtel joined hands to launch Ovi Life Tools service targeted at providing Airtel's mobile customers with access to relevant content on education. This partnership between India’s largest maker of mobile devices and largest telecom operator represents a wide scale distribution model that will empower Indian masses with improved access to information available in a simple icon based, graphically rich user interface. This initiative includes focused offerings on Learn English, General Knowledge & Exam preparation modules covering State and Central Boards.

As developing nations recognize the potential impact mHealth and mEducation can have on its country’s health care and education system, we will witness a surge in the mHealth and mEducation movement as governments invest significant resources to build and to expand offerings for its citizens. Developing nations don’t have the infrastructure for standard telecommunications, but mobile communication is readily available. Hence, it naturally makes sense to leverage wireless networks to deliver health care in these rural areas. A number of organizations are looking at ways to expand their mHealth offerings in places like India, Africa, and China. In particular, we’re seeing modified versions of telemedicine emerging as cost-effective alternatives to direct patient interaction. Also, with the increasing penetration of smartphones it is believed that the growth of mHealth and mEducation will gain momentum.

Written by : Rahul Singh

                  MBA TM ( I )

                      SITM