Indian Telecom Story (Part XXXII): A snapshot of the Telecom handset markets in India.

Gartner projects a growth of 18.5% in telecoms penetration in India this year.Mobile handset sales will rise to 138.6 million units in 2010, up from 117 million last year and is expected to hit 206 million by 2014.India is the second largest mobile devices marjet in the world with a 636 million mobility numbers.However, established global device manufacturers are losing ground due to fierce competition from local and Chinese manufacturers in the low-cost segment.

According to Gartner, Price is the main criteria for purchasing mobile device. The average selling price of a mobile phone in India is $52 (~ Rs.2400) whereas, 85% of all mobiles sold in India are below $100 (Rs.4500).

These were thoughts to a few questions related to the momentum in the Indian Telecom Industrygoing forward.

What are the primary demand drivers in Indian mobile handset market?
1.In the Indian context, Every 10% of additional mobility increases the GDP by 1.5%. The growth engine primarily is the socio- economic benefits of “being connected”.
2.Reducing cost of ownership of mobile handsets
3.Wider range of services are expected to power growth by bringing communication/education/utilities and information closer to the consumer. The evolving telecom eco-system will drive services story not only in high end but also in the low and entry segments.

From and evolution perspective, has the Indian market reached a stage where the so-called upgrade demand is significant?

With a 55% mobility footprint, “Upgrade demand” is beginning to outrace the “entry demand” of mobile handsets. To that extent upgrade demand is becoming more and more significant. Having said that the “entry demand” will still be large in absolute volume terms. From a revenue and business perspective, the upgrade demand will be more lucrative given the low profit realization from entry handsets.

Among handsets, which segment (entry, mid-market or high end?) will drive growth ?
There are no absolute winner segments. Each has its own value story and each is expected to grow in significant amounts over the next 5 years horizon.
The entry segment represents 529 million Indians who are not connected yet. This is a bottom of the pyramid story and companies will need to be innovative and smart with their businesses to tap the entry markets.
The Mid end markets have seen the purchase cycles reduce with more features/benefits available at affordable prices. A large part of the earlier consumers are beginning to upgrade and hence this segment also holds a lot of promise in future.
The High end story will be propelled by Data, Services and 3G roll outs.
In terms of absolute numbers, the entry and mid end are larger than the high end.