India is set to follow China into the club of countries with one billion mobile phone users, later this year. And no longer is it just the basic voice handsets that are driving growth: The country has seen a surge in smartphone sales over the last few years, driven by the availability of affordable handsets, introduction of 3G connectivity and cheap rates for data.
The consequence is that, for global handset manufacturers, the battle in India is heating up. The players are some familiar Western names and some local companies, with one big exception: Apple (Nasdaq: AAPL). The world's biggest company by market value is a virtual nonentity in India's mobile market, where the rules (and prices) are different from what Apple is used to facing in the developed world.
Nokia (NYSE ADR: NOK) (Helsinki: NOK1V), Samsung (Korea SE: 005930) and Research In Motion (Nasdaq: RIMM), or RIM, are all hoping their latest range of cell phones, jam-packed with applications, will help them grab a share in the country's lucrative mobile phone business, valued at $6 billion per year.
One of the key areas of priority for RIM currently is to focus on strengthening its application ecosystem in India. "Increasing consumer preference and dependence over smart apps to manage their day-to-day chores or work has been instrumental in the emergence of the application in India," said Annie Mathew, Head of Alliance, India at Research In Motion, the Canadian company that makes BlackBerry smartphones.
RIM is keen to make its mark in India and plans to invest heavily in new markets like it. Significant investments to the tune of $100 million have been committed to emerging markets across the globe for channeling talents to develop applications on the BlackBerry App World, Mathew said.
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But RIM is not alone in noticing Indians' appetite for mobile apps. Finnish cellphone maker Nokia recently unveiled tie-ups with local telco operators Bharti Airtel (NSE India: BHARTI) and Vodafone (NYSE ADR: VOD) (FTSE: VOD), hoping that the availability of applications from the operators will help sell its smartphones.
Koreans Gunning For The Top
Nokia needs a boost in smartphones in India, because Samsung is overtaking it. The Finnish company was still the overall No. 1 handset seller in the country in the June 2011 to June 2012 period, according to Voice&Data's annual survey, with its 38.2 percent market share. Samsung had an overall market share of 25.3 percent, while local handset makers Micromax and Karbonn were third and fourth with a share of 6.3 percent and 4.3 percent, respectively.
Yet Samsung is growing fast, and Nokia is falling. The Korean company's market share in the first quarter this year in smartphones was in the region of 45 percent, according to Indian Research firm Convergence Catalyst, while Nokia's is estimated to be between 25 percent and 30 percent. The research company said about 9.5 million smartphones were sold in India last year.
Nokia isn't ready to hang up just yet and is trying to lure customers with handsets that are cheap but give access to the Internet. Nokia's basic phones, the 110 and 112, are data-enabled, and the company is banking on its Asha series, a low-cost smartphone that may be better suited to the Indian market than the Lumia, Nokia's top line of handsets.
These devices come preloaded with the Nokia Browser, which is known to compress data consumption by nearly 85 percent, reducing costs and providing consumers with faster access to their favorite sites. The Nokia Browser has a catalog of more than thousands of the latest apps, said Saulo Passos, communications director for Nokia Mobile Phones.
Analysts say Samsung has managed to succeed in smartphones thanks to its preinstalled apps coupled with the free-to-use Android platform, because Indians are more likely to buy phones with a number of apps already installed.
"The Indian market is ruled by customers wanting value for money. Buyers will choose a phone that has apps already installed or one that offers free applications, such as those running the Android operating system over a phone that offers paid-for apps," said Rahul Gupta, an adviser with Gurgaon, India-based Monk Consulting.
iPhones For Cool Kids (And Nobody Else)
Western customers used to seeing iPhones everywhere might wonder: Where is Apple (Nasdaq: AAPL) in all this? Nowhere, in fact, as far as India is concerned. According to the Voice&Data study, the iPhone didn't even make it into the top-10 best-selling handsets in the country, where Apple currently has less than 2 percent market share. Apple handsets are seen as very pricey by Indians and are only favored by the country's uber-cool set (Bharti Airtel sells the basic 16-gigabyte model of the iPhone 4S for 44,500 rupees, or $800. That's two-thirds of the average Indian's annual income.)
Those cool kids and the rest of India's smartphone users have one thing in common, though: They are heavy users of social media. Almost 90 percent of app demand in the country comes from social networking and games. And the downloaders are young: The prime users are 13 to 30 years old. And it's not just wealthy, urban youth who are driving this growth. People living in India's poor countryside and members of marginalized communities offer masses of potential for apps makers and can help drive social change.
The high cell phone penetration rate represents a major opportunity in rural India. Mobile technology and, in particular, the advent of social media offer a powerful channel for drawing awareness to a global audience. Moreover, "cell phone applications provide learning opportunities outside the traditional system," said Nicole Darabian, research analyst at Decode Global, a Canadian mobile apps incubator company.
The numbers are already impressive. About 100 million apps are downloaded every month in India. According to research by Informa Telecoms & Media, a UK-based consultancy, revenue from mobile data and value-added service in India will grow from the current $4 billion to $15.9 billion by 2016.
For developers, India means potential juicy returns. Take Jhalak Dikhhla Jaa, the Indian version of the hugely popular TV show Dancing with the Stars.
The show's producers have teamed up with an Irish apps development company, InTime Media, which has developed a Jhalak Dikhhla Jaa mobile app that allows viewers to watch their favorite episodes, go behind the scenes of the show and vote for their favorite contestants via various social media.
"There are really massive opportunities in India for us. It is very exciting to be entering a market right at the top and to be able to access opportunities so quickly and rapidly," said Julian Ellison, the chief operating officer at InTime Media.