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Indian Handset Firms Grab Market Share

Domestic handset manufacturers in India are, for the first time, providing a real challenge to the dominance of the multinational mobile device players like Nokia Corp. (NYSE: NOK).

Micromax Informatics Ltd. , which has just received a $45 million capital injection from private equity firm TA Associates, is now the No. 3 mobile device (handset and data card) player in the Indian market, according to the latest market data from IDC .

According to data from the research firm, in the three months to the end of September 2009, about 24.1 million handsets were sold in India, with Micromax securing a 6 percent share of the total Indian handset market, ahead of LG Electronics Inc. (London: LGLD; Korea: 6657.KS) , which managed just 4 percent. Samsung Corp. was the No. 2 handset firm, with a 7 percent share, while Nokia remained way ahead of all its rivals with a hefty 66 percent market share.

Then in December 2009 alone, Micromax, which has been providing Mahanagar Telephone Nigam Ltd. (MTNL) with 3G devices, recorded handset sales of 700,000, while Samsung sold 940,000, and market leader Nokia recorded unit sales of around 4 million, according to figures sourced from the vendors and the sales channel community. (See MTNL Offers Pre-Paid 3G.)

"On average we have been selling around 500,000 handsets [per month] since April 2009, but in November we sold around 610,000 handsets, and in December, which was the biggest month for us, our sales volume touched 700,000 handsets," Vikas Jain, business director at Micromax, tells Light Reading. "We would like to close this financial year [ending March 2010] with around 10 percent market share."

Micromax isn't the only Indian handset maker that is slowly, but steadily, eating into the market share of the multinational players such as LG, Nokia, Samsung, and Sony Ericsson Mobile Communications , which have been dominating the market during the past few years' dramatic growth. More than 20 Indian players entered the market in 2009, when India reached, and passed, the 500 million subscriber landmark, with the likes of Karbonn Mobiles , The Mobile Store (which uses the brand name Ray), Fly , Movilmobile , and Maxx Mobile Communications Ltd. also gaining sales. Many of the new entrants are distributors or retail outlets that have existing channels and sales operations. (See India Passes 500M Mobile Mark.)

The opportunity for more local players to make their mark on the handset sector came when the Indian government ruled in 2008 that, for security reasons, all devices must have an International Mobile Equipment Identity (IMEI) number. The market was already flooded with low-end handsets (mainly from China and Korea) that didn't have IMEI numbers, and which were disconnected from India's mobile networks late last year. With industry estimates putting the number of non-IMEI handsets at around 25 million, a significant market opportunity arose.

The impact that India's new entrants are having can be seen in the decreasing market shares of the leading players. Nokia, for example, had a market share of 75 percent at the end of the fourth quarter of 2008, but this dipped to 66 percent by the end of June 2009, according to IDC.

The main reason Indian brands are enjoying increasing success is that they're able to offer high-end features at low-end prices.

While the design of the Indian vendors' handsets are very similar to those of the popular models produced by Nokia and Samsung, the prices are low. Karbonn’s portfolio consists of around 25 devices, but none of them is in the high-end segment, with a price range between 1,700 Indian rupees (US$37) and INR6,000 ($131). The same is true for Micromax, which, with its focus on sales in rural areas, has an average selling price of just INR2,400 ($52).

Jain at Micromax says most of the Qwerty keyboard handsets in the Indian market cost more than INR10,000 ($218), "but we launched one for INR4,500 [$98]. So basically we created a market where there was none."

"The main reason for success is that the Indian players are able to offer good devices, with popular features like long battery life [and] dual SIM," says Anshul Gupta, principal analyst, mobile devices, at Gartner Inc. in India. "It's value for money. Their understanding of the market requirement is great."

One of those hoping to match Micromax's success is Karbonn, a joint venture between Bangalore-based United Telecoms Ltd. (UTL) and Delhi-based Jaina Group, that is aiming to capture a market share of between 7 and 10 percent.

"Having launched our operations in March 2009, we have already sold over 2 million devices in India, and currently we are selling around three to four lakh [300,000 to 400,000] devices per month," says Jaina Group's managing director, Pradeep Jain.

That kind of early success is likely to attract further companies into the market, believes Gupta, who feels there are already too many players. "There are around 32 to 40 handset vendors in the market. There is definitely going to be some consolidation," predicts the Gartner analyst.

— Gagandeep Kaur, India Editor, Light Reading

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