Top cellcos switch off sub-Rs1k handsets

THEY are dubbed as the means to connect the other half a billion. Despite the vast market in rural India, sub-Rs 1,000 mobiles are not on the radar of top handset makers. Mobile biggies Nokia, Sony Ericsson, LG and Samsung are not planning to join the race because it will hurt their bottomlines. The differential of just around Rs 400 between colour and black & white (monochrome) handsets makes the category unprofitable. Rural consumers are now becoming style-conscious, preferring colour over monochrome handsets. Not surprisingly, the share of black & white cellphones in the Indian market declined from 70% in ‘05 to 50% in ‘06 and is expected to be around 30% by the end of this year. According to Nokia India VP & country general manager D Shivakumar, quality is likely to be compromised in such a handset. Nokia, which is the largest player in the Indian mobile market with a share of over 70%, is not keen to produce it. “I don’t see the Rs 1,000 benchmark breaking, at least not with the rigour and quality we want,” he told ET. He said there was a limit to which prices could be reduced and at the lower end, prices tend to go down at much slower. Nokia’s cheapest GSM and CDMA mobiles are today available for Rs 1,699. BK Modi group’s Spice had announced the launch of a ‘People’s Phone’ at less than Rs 1,000 phone and the company expects to have a market share of 10% by ‘10. However, not everyone is convinced about the possibility. Motorola, which had launched the cheapest made-in-India mobile in ‘05 including the very basic MotoFone for rural areas in India, has seen a reduction in profit margins globally due to its big bet on cheap phones in emerging markets. Profit margin in Motorola’s phone division shrunk to 4.4% in Q4 of CY2007 from 12% in the preceding quarter. “We cannot grow at the expense of driving premium products and margins down,” Motorola chief marketing officer Casey Keller had said. Motorola’s Indian representatives did not comment. Sony Ericsson India general manager Sudhin Mathur said the company needs to have a profitable growth. “We will have entry-level phones, but they will be based on value proposition. We will not be in a segment which is not profitable,” he said. Sony Ericsson, which plays only in the GSM segment, will make basic handsets at the Chennai plant but will continue to stay away from the monochrome category. According to LG India business group head (GSM phones) H S Bhatia, the difference between prices of monochrome and colour mobiles is just Rs 300-400.

Courtesy: EconomicTimes