The Vanishing Act
FY12.saw.many.handset.companies. shut.shop,.the.Big.Five.ruled.the.Indian. market..
For the Indian telecom industry, the year 2012 saw a huge slowdown on all aspects. Be it value of the rupee, deployment of equipments at enterprises, service providers or even consumers—the market dynamics witnessed a slump. Even the monthly new mobile user additions came down from an average of 13 mn to some 4-5 mn per month.
The worst affected segment was mobile handsets. Consolidation ruled the game of the mobile handset business in India. Just a year back there were more than 200 handset brands doing business here, irrespective of scale, but in FY12, the number had come down drastically and many brands including MNCs, homegrown and grey, simply disappeared from the business.
Keeping the fiscal 2010-11 as the base for comparison, there were three categories of handset companies operating in the Indian telecom space. The MNCs include Nokia, Sony Ericsson, Samsung, Motorola, LG, RIM, HTC, Apple and a couple of Chinese players; the Indian companies include names like Micromax, Maxx, Lava, Karbonn, Lemon etc; and then there
are the grey market players like G’Five, Airphone etc. The business of last year impacted all the three categories. Among the MNCs, once dominant players like Motorola, LG, and Sony Ericsson, had hardly made any move. The only brands that did some good business in that category were Nokia, Samsung, and HTC.
Even RIM saw a drastic fall in its sales. Among the Indian handset brands, though the traction was poor, companies like Micromax, Karbonn and Spice were able to make their presence felt. At least they were available in the shelves of retailers across the country. The grey handset market simply vanished from the picture. Even if there were some sales of these brands, they were just clearing their old stocks. Overall, around 30 known brands closed shop or are in the process of doing so.
What impacted the performance in the handset business most in the last fiscal was the consumer behavior. The Indian consumers no more remained a price conscious lot. Though they did not like to splurge, they became more wise in buying products, demanding more value for the same price.
So the low-cost handset business that was the main driving factor of the Indian handset market couple of years back suffered a lot, and the consumers did not search for the ‘cheapest phone’ in the market, rather, they searched for ‘what more can I get at this price point’.
Fueling their ego is the availability of entry level smartphones at much affordable price range. So the buyers who used to go for entry level feature phones are ready to stretch their budget to another couple of thousand rupees in order to get an entry level smartphone. And rightly so, they got more value for their money. The availability of entry level smartphones running on android platform, and mostly from Indian handset companies, gave the users the confidence to go for that.
Hence, the handset companies lowered the price of their mid-range phones to the earlier price of their entry level phones. And it happened across brands including RIM, Samsung and Nokia. The feature phone segment suffered a lot due to this. On the other hand, the buying frequency of average Indians went up last fiscal. The people who used to buy or change their phones once in 11 or 12 months earlier, now ready to change in every 6 to 7 months. So there was a demand for more supply and the companies were forced to bring out new and fresh models to the market.
The erstwhile leader in mobile handsets, Nokia appeared confused in the last fiscal. For the last couple of years it remained indecisive on what to do for its handset business, not just locally but also globally. Its switch between Symbian and Windows based models did give the industry a cold shoulder.
The buyers—those who are not brand loyal to Nokia—could not understand why the Finnish company was not coming up with android devices when all other big names in the handset business vouch for the Google created OS.
Besides Nokia, there are only two companies who do not have presence in android ecosystem—Apple and RIM. And certainly Nokia is not Apple or RIM. These two companies have their own target customers and have a different USP. Nokia caters to everyone but failed to adopt a platform that touches everyone. In FY12, the Finnish company seemingly tried to undo some of its follies of FY11.
It launched more number of dual SIM phones, where it had lost market share to the Indian companies in the fiscal 2011 due to its non-presence. It made significant growth in this segment but lost phenomenally in its smartphone business. It lost to its other competitors, Samsung and HTC. Its Lumia series phones that witnessed huge growth globally in the initial phases, could not draw much attention in India. Nokia’s revenue that was almost flat in FY11 compared to FY10 saw a dip this fiscal too.
The year 2011 certainly belonged to the smartphone makers, and the clear winner was the Korean electronics behemoth, Samsung. It toppled Nokia in the smartphone business, both in volume and value terms. Its Star and Galaxy series phones were instant hits in the Indian market. The entire product portfolio of Samsung were selling like hotcakes.
There are many factors to Samsung’s success in India. Few are organic and some of them are inorganic. The most notable among its inorganic growth fac-
tors was the lack of choice for consumers in smartphones as well as mid-range multimedia phones.
Besides Samsung, there were only two or three brands available who have some brand recall value—RIM, HTC and Apple. LG, Motorola, and Sony Ericsson were almost dried up names in the business.
So users who wanted to go for a new phone and are a little brand conscious had no choice but to go for Samsung. Besides, the company had launched numerous products ranging various price points for all kind of customers. It also brought some ‘firsts’ to the Indian market. The most remarkable was the launch of the Galaxy Note, a hybrid product between smartphone and a tablet. It saw huge demand in the market. The Galaxy S series phones have been doing remarkably well for last two years.
BlackBerry maker, RIM saw a difficult time in the last fiscal, not only in India but also globally. Management issues, product failure, and lack of any defined USP let the Canadian company down. Though the company tried the easiest trick to catch up with the market and to gain customer loyalty, by lowering prices, not many were impressed. However continuing the trend of the last fiscal, its entry model devices saw huge traction in FY12.
Another Korean company—LG— seemed to be oblivious to what is happening in the Indian market. Once among the top three most popular phones in the country, the company had somehow missed the bus and has been losing market share consistently. In its Indian business, the company does not have a clear segmentation for its mobile phone business, though the areas of operations like home appliances and electronics are a brand to reckon with. The only models that the company saw some sales are in its Optimus range. The company too did not launch many models during last fiscal.
The Taiwanese handset maker HTC, however, is taking long strides in the Indian market. It has been growing at more than 100% for the last few years. High quality products, less after-sale issues and a clear demarcation in smartphones, make the company a clear choice for most of the smartphone buyers.
The situation with the Indian handset companies were no better. Most of them have disappeared from the scene, barring Micromax, Karbonn, Maxx, and Lava. Micromax’s performance was almost flat in FY12, as it tried to realign its businesses. The average selling price of most of the Indian handset companies went down including that of Micromax. Karbonn phones, however, saw huge demands in the B and C category cities. In volume terms, it sold more phones than its near competitors like Micromax. Lava phones did not see much growth.
Future: Back to Square One
The Indian handset market, once inundated with more than 200 brands, have now come down to 10-15 brands. It is expected to complete the consolidation process in the next fiscal and the market will be again catered by by far five or six brands. The earlier ‘top five’ companies like Nokia, Samsung, LG, Motorola, and Sony Ericsson might not be the next five in coming times but the market would be served by similar number of players. The new entrants to the top five could be HTC, Micromax, and Sony Ericsson, besides Nokia and Samsung.