Once the undisputed market leader in the global handset space, Nokia has been facing stiff competition from rivals like Samsung, Apple and Research In Motion in the past few years. The Finnish handset vendor has recorded a significant dip in its global market share from 34.7 per cent in the second quarter of 2010 to 24.5 per cent in the corresponding quarter of 2011, the lowest since 1999.

The story in India is no different. While retaining its popularity and about 40 per cent market share, Nokia has not only been steadily losing ground to global players like Samsung and Sony Ericsson, but has also been tackling competition from homegrown Indian handset-makers like Micromax, Lava Mobile Phones, Spice Mobiles, Karbonn, MAXX Mobiles and Zen Mobile.

These domestic players entered the market two years ago with low-cost handsets that had the look, feel and features of a high-end smartphone. Consumers could now own touchscreen phones with a QWERTY keypad and a 5 megapixel camera that supported dual (and more recently, triple)-SIM cards at prices starting from as low as Rs 2,000. Indian users, mostly the youth, started opting for such devices, catapulting the market share of these new players to among the top ten.

As per industry data, the market share of handset makers in 2010-11 was as follows: Nokia held 39 per cent share followed by Samsung with 17.2 per cent, Micromax with 6.9 per cent, BlackBerry with 5.9 per cent, LG with 5.5 per cent, G’Five with 4 per cent, Karbonn with 3 per cent, Spice Mobiles with 2.8 per cent, MAXX Mobile with 2.2 per cent and Sony Ericsson with 2.1 per cent.

The new handset makers had clearly done their groundwork well. They reckoned that with roughly one handset being sold every minute in the country and over 2 million Indians purchasing mobile phones every month, the handset market was a mine of opportunities. Besides, Nokia had, for many years, been the top player in the Indian market with Samsung being a distant second. The absence of a dominant handset brand in the country, other than Nokia, thus presented ample opportunity for new players to test the waters. Their numbers have since grown visibly, increasing from five in 2009 to over 50 today.

Strategy

The new handset suppliers have a multi-pronged strategy, which is aimed at providing handsets loaded with features at affordable prices. The key strategy is to target the bottom of the pyramid and use “push-and-pull” marketing tools. “The real critical mass in the Indian market lies at the bottom of the pyramid,” notes Sanjeev Mahajan, CEO, Spice Hotspot. “Indian handset players have recognised this and have hence been able to increase their share from less than 5 per cent to approximately 25 per cent over the past 30 months.”

The government’s directive barring the use of handsets without IMEI numbers has further helped these vendors by eliminating competition from vendors of cheap Chinese handsets.

Targeting the right audience

Rural India has been identified as a key market by many of these companies. For example, Wynncom, a new player, has established its presence in the rural areas of Uttar Pradesh, Andhra Pradesh, Madhya Pradesh and Maharashtra, while Airfone has been focusing mainly on Gujarat and Rajasthan. In fact, officials say that 30 per cent of the company’s revenue is generated from these states.

While tapping the semi-urban and rural segment seems to be a sound strategy for the moment, analysts believe that going forward, the new handset vendors will also be looking at the urban replacement market. Indian players are expected to supply feature-rich, QWERTY and touchscreen handsets to these markets.

Price points

Right pricing is key in a price-sensitive market like India. For local handset makers, a focus on affordability and innovation is important to take on the bigger players.

This strategy hinges on the belief that consumers in rural and semi-urban areas would rather opt for utility-based, affordable products than focus on the brand. According to an official from Zen Mobile, consumers in a suburban or a Tier 2 town look for value-for-money handsets with innovative features. Micromax, for example, packs in a range of utility features in its mobile phones while keeping its price point affordable. Most of its devices are priced between Rs 2,000 and Rs 5,000. Similarly, Wynncomm Mobiles’ hand-helds are priced between Rs 1,000 and Rs 4,000, while Airfone and Olive have maintained their price points between Rs 1,000 and Rs 4,500.

Features

According to industry analysts, domestic handset players have been able to carve a niche for themselves based on two factors – the ability to innovate faster than global players and a strong India focus. Spice Mobiles is a clear example of the former. The company was the first to launch a dual-SIM card (GSM+GSM) handset, the M-6060, in India in 2009, which was priced at Rs 4,399. The device packed in a 1.3 megapixel camera, an MP3 player and the Spice Masterji application that helped students prepare for various competitive examinations by providing test papers, general knowledge information, etc.

Micromax’s flagship offering, the X1i had a different selling point altogether. Its USP was its long battery life (the 1800 mAh battery had a standby time of 30 days), thus making it ideal for rural areas where power cuts were frequent. It was priced at Rs 1,599. Lava Mobile decided to adopt an India focus. It introduced a multilingual handset, the Lava KKT 15, which was preloaded with 12 Indian languages and cost Rs 2,899.

Today, keeping mainly the semi-urban and rural customers in mind, the domestic players’ offerings come equipped with flashlights, loud audio and video players, larger displays and expandable memory. They also have features such as multiple address books, dust-resistant keypads, regional language interfaces and pictorial icons to simplify usage for consumers unable to read or write.

These brands have also kept themselves abreast of technological advancements and are quick to incorporate them in their devices. For example, they were amongst the first in the country to adopt the Android operating system. While HTC Corporation had the distinction of introducing the very first Android-based handset in the country, Micromax was the first Indian vendor to follow suit with the Andro A60. This device featured a touchscreen, a 65,000 colour display and a 3.2 megapixel camera, and was priced at Rs 6,500.

Another interesting offering from domestic players was 3D devices. Spice gave the country its first 3D device, the View D handset. Priced at Rs 4,299, it enabled users to view 3D pictures and videos without 3D glasses and supported dual-SIM (GSM+GSM) cards.

Interestingly, each domestic vendor has a different focus area in terms of features. While Micromax targets the low-cost smartphone segment, Lava Mobiles targets users uncomfortable with a QWERTY keypad by offering a handset with an Alpha keypad, priced at Rs 4,300.

Marketing and distribution

Indian players have mostly opted for co-branding with major sports events, such as the Indian Premier League (IPL), and have relied on celebrity-centric advertising for brand recall. For example, Micromax and Karbonn advertised extensively during the IPL series while Videocon featured prominent cricketers in its advertisements.

Similarly, Zen Mobile has signed on Amitabh Bachchan as its brand ambassador in Tier 2 and Tier 3 cities. According to Deepesh Gupta, managing director, Zen India, “The motive behind this is to create an impact on the minds of our target audience as the Indian film actor is a quintessential mix of charisma and style with a mass appeal.”

To ensure easy availability of handsets and strong after-sales support, most of the vendors have a strong retail and service centre network. Micromax, for instance, has a distribution network of around 75,000 retailers across the country. On the other hand, Lava Mobile’s products are available through 25,000 retail outlets and over 250 service centres. Intex Technologies has 2,000 distributors, 2,000 dealers and 500 service centres; Zen Mobile has over 25,000 retail outlets; and Karbonn has more than 500 retail outlets.

R&D initiatives

Domestic handsets have so far been manufactured mostly in China or Taiwan. However, the indigenous players are increasingly looking to manufacture handsets in India. Many have already chalked out plans and investments to set up manufacturing units in the country.

Micromax, for example, has announced plans to set up a manufacturing plant for an estimated Rs 2.24 billion. Similarly, Lava Mobile also plans to set up an indigenous manufacturing plant.

Conclusion

To continue the growth momentum, analysts believe that domestic handset makers need to constantly invest in innovation and brand building. They also need to strengthen their distribution network and after-sales services to move up the value chain, both in terms of technology and markets, and counter competition from Chinese players looking to enter the Indian market.

Going forward, the market for such players will only expand, especially as operators move to rural India with their mobile, 3G and broadband services. In this scenario, companies like Micromax and Lava Mobile will have a big market for their feature-rich yet affordable phones.