Mobile MarketAn analysis of mobile phone market in India

Vaibhav Gupta, Varun Kaw, Vikram Singh, Rahul Shah, Tapas Tiwari, Tsetan Angmo

Managerial Economics2nd September 2011

Growth and Diffusion of Mobile Phones in India

“Quote” (optional)– Quote source

“A lot of people think that the new economy is all about the internet. I think that it's being fuelled by the internet - as well as by cell phones, digital assistants, and the like - but that it's really about customers. ”

– Patricia Seybold

- 4 -

World’s second largest telecom market in the world.15 million new users added per month.Urban Teledensity = 70% Rural = 30%Liberal Foreign Investment Regime – 74% FDI allowed.Government- provides tax sops and telecom specific SEZGovernment’s Revenue ( regulatory charges + taxes)

increase as operators’ revenue increase.

India: Ideal destination for Investments

Low Teledensity= Higher Opportunity

- 5 -

Mobile Handset v/s FDI

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-110

500

1000

1500

2000

2500

3000

116 129

653 680

2507 2531

1660

590

17.5 32 66 85 94 101.54 155.9223

FDI in USD(million)Sum of handset sold(millions)

- 6 -

Mobile Tele- Density

1995-96 1999-2000 2003-04 2007-08 2010-11 2015-160.02 1.88 7.1

23.2

70 90

0.02

3.98

14.32

60

143 160

0.00010.02 1.5

10.31

31

60

Tele-densitySum of mobile density Sum of urban Sum of rural

10 fold increase in teledensity from 2003-04 to 2010-11

- 7 -

Production and Export (millions)

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-100

10000

20000

30000

40000

50000

60000

14400 1400016090

17833

23656

41270

4880051200

402 250 400 1500 1898

8030 11000

13500

productionexport

- 8 -

How it helps the economy – micro view

Some things which we might not have thought as a benefitExample of reach of FM Radio Example of m-commerce Increased productivity by smart phones

Market Target and Segmentation- Economic View

- 10 -

Segmentation Strategy Potential Market

Lower income group

Middle Income Group

Top Income Group

Features Base Features Base

Features Base

- 11 -

Our Survey

We surveyed about people choice and preferences for a mobile

143 overall responses, 70 manual Population contains people from all age and income

groupsSample is a bit skewed towards people of age-group 25,

60% of population from this group. Considering the average population to be mostly in this group.

- 12 -

Survey Tells us

Around 70% of the people surveyed believed NOKIA is the most durable phone.

However more than 50% of the people in the income range >20k/month preferred BB or APPLE .

In the income bracket <10k brands didn’t matter features did.

Battery was essential in every segment.

- 13 -

46 users responded NokiaLikely to be a normal distribution (>30)Average salary = 26.67S.D. = 7.63390% confidence intervalIncome group of Nokia users 20k-31k

Income for Nokia Users

- 14 -

Success Story 1- Kerala Fisherman

Gets a good catch of sardines .So do the rest of the fishermenIncreased supply makes the prices fall.The fishermen has to throw back into the ocean the unsold

fishesIn the nearby village the supply was shortIn came the mobile phones in 1997After that the consumer prices fell sardines fell 4% and the

fishermen’s profits rose by 8%

- 15 -

Success Story 2- VASRevenue generation by VAS.ABCD of VALUE ADDED SERVICES.Communication with god has changed over the yearsRather than waking up in the morning to a jarring alarm

wake up with a prayer @30rs/monthOther devotional services provide the auspicious and the

inauspicious dates of the calendar yearFree quotes from your god @28/month or 7/week with a

free screen saver too.

- 16 -

Mobile Banking for Villagers

Scarcity of banking system in villages can be covered up by mobile banking

March 2012- around 73k villages with 2k population each identified for mobile linked basic bank.

UID to be linked with the Banking Correspondent to make the transfer foolproof.

Not glitch free can have some power and connectivity issues.

Drivers and trends

- 18 -

DriversGovernment

Policy

Telecom policy

Industry specific foreign policy

Market Players

NOKIA started up in India in1995

93 handset companies at present

Income Level

Per capita income

Massive middle class

- 19 -

Drivers -2

Price

Handsets ranges from 1k – 50k

Very low usage tariffs

Customization

User-friendliness

Responding to the consumer behavior

- 20 -

Calling Rates also drives market

- 21 -

Challenges

Low level of penetration in semi-rural and rural areas with skewed teledensity of 64.74%

Lack of InfrastructureSaturation at urban levelMobile internet users

- 22 -

Trends

Replacement SalesPayments and Banking go onlineHardware to Software transition- applications and utilities.Smart phones and tablet convergenceRise of Indian companies

- 23 -

Latest innovations

Players , Competition and Factors of Demand

- 25 -

Major Players in India

- 26 -

FYIs

Finnish handset maker Nokia is losing its market share in India

Nokia currently has a market share of 36.3% at the end of June 2010 from 54% at the end of June 2009.

Second biggest player happens to be Samsung .And MicroMax has surprisingly become the 3rd largest

player recently according to market share.

- 27 -

Different Tier of Mobile Phone

LOWER TIER(Rs1500 to Rs10000)

70% of revenue generate from this market segment.

MID TIER (Rs10000 – Rs25000)

20% of revenue generate from this segment.

TOP TIER (Rs25000 to Rs100000)

10% of revenue generate from this segment.

- 28 -

Tier and Buying Pattern Basic Users Lower and Top

Tier Groups Middle Income

Features

Price

BUY

- 29 -

Our Survey

For the basic users durability, battery life, warranty and user friendliness sound quality was very important and other high end technologies didn’t mattered.

Most of these persons were either daily wage earners or the people above 60. An interesting thing to note was that 3 out of 6 persons gave importance to camera as well.

Mobile with a camera is on the way to become a basic feature.

- 30 -

Till the age of 40 we discard phones just within 1-2 years

- 31 -

SWITCHING

Switching propensity from lower level segment to the mid tier segment is expected to increase with the increase of income level and technology development

Lower Tier Mid Tier

1.Income level Increase

2. Technology development

- 32 -

Women and Mobile

Global opportunity as well as social welfare

300 Million Fewer Female than Male Subscribers: A US$13 Billion Opportunity

Mobile Phones Unlock Economic Opportunities, help to save time and money, improve productivity, increase return on investment and maximize household resources.

- 33 -

MERA MOBILE MERA SAATHI

Mobile penetration among women in many developing markets is consistently low.

In an effort to bridge the mobile gender gap in India , Uninor joined forces with the GSM Association Women advocacy campaign.

It was officially launched in January 2011, in the states of Uttar Pradesh and Bihar.

Key Developments, Customer expectations and Behaviour

- 35 -

Key Developments

India has become the largest market now in terms of sales and growth rate.

Apple is ahead of Nokia and RIM Blackberry in Smart Phones Market globally.

G-Five, Micromax , Lemon, Fly have become increasingly popular. Thus increasing the competition .

The number of handset makers in India has grown from 5 to 28 in the last year alone.

Impact: Market is tending towards Perfect Competition unlike earlier times when it was tending towards Oligopoly.

- 36 -

Success of Indian Companies

Target Segment: Rural Market & Low Wage Earners.Strategic Pricing: Cheaper models with loaded features.Connect with Customers on the basis of their region &

language.Freedom Of Shifting to a better platform, better brand or

newer technology later.M-Commerce in Rural India.Applications like Weather forecasts, crop prices, fertilizer

prices etc. on VAS Services.

- 37 -

Customer Buying Pattern

<14 14-19 20-25 26-39 40-59 60+

MALE Nokia Nokia Nokia/ Samsung

Blackberry/Nokia

iPhone/ Blackberry

iPhone

FEMALE Sony Ericsson

Samsung Nokia/ Samsung

Nokia Nokia Nokia/Sony Ericsson

- 38 -

Market Share(Survey Results)

Apple IPhone10%

HTC3%

LG6%Micromax

1%Motorola

1%

Nokia45%

Other1%

RIM Blackberry8%

Samsung17%

Sony Ericsson7%

- 39 -

MALE FEMALENokia sells for its durability, applications and user-friendliness.Among working males, Blackberry is highly popular because of its email and calendar sync featuresAmong elders and senior level professionals, Apple is the preferred choice because of its exclusivity and appeal

Our Survey Suggests that

Sony Ericsson and Samsung are popular because of their styling, music and camera features.Among working females, Nokia is a popular option because of its feature packed phones in the segment, and ease of use.Among Elderly females, nokia is preferred option due it its simplicity of operation

- 40 -

Expectations

62% of Male and 66% of Females want to locate restaurants and shops in a particular radius. ( most wanted feature).

50% Of female respondents want to locate and track their friends using the mobile , while only 30% males want that.

10 out of 63 female want to use barcode to find product info while 57 out of 109 males would love to use it.

- 41 -

Revolutionary Phone Deal ?

We surveyed that how much they can shell out for the world’s best phone made ever having these features

1. Face Recognition

2. Voice Assisted GPS with advanced navigation using MQRS technology.

3. 3D Video Recording, 3D video playback and gaming without glasses.

4. Universal In- built remote to handle all devices in your home.

5. Lots of Hitech features like WiDi over Wi-Fi.

- 42 -

There was no Deal- it does not exist

Average money that people having the last two digits we asked for between the range of 0-50 was 16.5 k

While the average for the other half, (50-100) was 23.5kBehavioral economics can explain this.Known as Anchoring effect

- 43 -

The Iphone

Using Behavioral economics to determine the consumer base of Iphone.

The exclusivity and Constructed Preferences theory.

Too much choice issue with other phones.

Sheena S. Iyengar and Mark R. Lepper,

“ When Choice is demotimavating : can one desire too much of a good thing”

- 44 -

Work In Progress

1. Correlation between the no. of phones owned and the demographic classification – Coefficient of determination.

2.Factor analysis-- correlation between ranking of different features, and then arranging into clusters, the features which show highly correlated ranks

3.Porter Five Forces Analysis4. Analysis using Game theory to determine how are

certain models priced and targeted

Questions and Comments?You can also mail your comments and suggestions to

vaibhav.g13@mibdu.org, or shoot us on Facebook group.

Thanks for Listening