Mobile industry

INDUSTRY PROFILING :MOBILE INDUSTRY

UNDER THE GUIDANCE OF PROF A.K. SHARMA

Submitted by –

Dishant Hans (22)

Mohit Goyal (33)

Piyush Jain (43)

Shivank Rastogi (57)

Vaibhav Agrawal (66)

Table of Contents

1) HISTORY OF MOBILE INDUSTRY2) REASONS FOR CHOOSING MOBILE INDUSTRY

3) MAJOR PLAYERS IN MOBILE INDUSTRY4) PRESENT SCENARIO OF INDIAN MOBILE

INDUSTRY5) RECENT DEVELOPMENT & TECHNOLOGY6) 6 KEY DRIVERS OF THE INDIAN MOBILE

INDUSTRY7) GROWTH OF MOBILE INDUSTRY

HISTORY OF MOBILE INDUSTRY

Till 1984 telecom services were under state government control with the department of Post and Telegraph which was later crafted out as Department of Telecommunication (DoT) in 1985.

After government of India announced National Telecom Policy in 1994 to allow Private players. Mobile industry held ground way back in 1995 with only a few subscribers. At that time it was considered as an item of luxury and not as necessity.

INDUSTRY PROFILING – MOBILE INDUSTRY

Indian telecom industry has penetrated market to 43% in last 10 years and so the Indian mobile industry has undergone a revolutionary change during the past few years to become one of the leading mobile markets on the global map.

Essar launched first mobile in India and the first mobile operation was provided by MODI Telstra.

Sluggish growth thereafter due to unfriendly telecom policies only 1 million users till 1998 but then comes new regulations in 1999.

. The number of mobile phones crossed five million by 2001 and doubled to 10 million in 2002.

o As here in graph we can see how mobile industry take stride in 2005 and continued in 2007 as well while landlines scoring almost same in users from 2005-2007.

o In 2008-09 the overall telecom equipments revenue in India stood at 136,833 crore during the fiscal, as against 115,382 crore a year before.

o The mobile handset market is expected to show steady growth through 2014 when end user sales surpass 206 million units.

REASONS FOR CHOOSING MOBILE INDUSTRY

Mobile industry in India is the fastest growing industry with lot of opportunity to grab ahead.

Factors responsible for the growth of the industry: Growing income of the middle-class families,

Popularity of mobile based services like online ticket booking

Low rate mobile connection plans

Technological advancement

India is the fastest growing telecommunications industry in the world, it is currently holding a market of 706.69 Million (Dec 2010) mobile phone users and is projected that India will have 1.159 billion mobile subscribers by 2013.


The mobile industry in India has been an attractive destination for the global mobile phone manufacturers from the very start.

The number of emerging vendors in India grew to 68 and these mobile handset providers captured 41.2% of total shipments (sales) for the first time during the July-Sep 2010 quarter.

Apart from mobile phone manufacturers, the industry has also seen the growth of mobile phone carriers, mobile phone application developers, mobile phone content providers and so on


There were more than 28 new handset brands which started selling handsets in 2009 making total to 63 and these new players account for over 12.3% of handset sales which is quite significant. The local players account for 17.5 % percent of sales now

Some of the major players are Nokia

Samsung

LG

HTC

MAJOR PLAYERS IN MOBILE INDUSTRY


On the basis of technology, Nokia is the dominant player on the GSM space, accounting for 63% of the installed base (phone’s currently in use) while LG rules CDMA with 48% of installed base market share.

The Chinese brand G'Five emerged as number two player in terms of unit shipments market share while Korean handset manufacturer Samsung stood at number three in 3Q 2010.


MARKET SHARE IN INDIA Even after facing tough competition from

companies like- Micromax and G-Five, Nokia is having a market share of 65% and Sony Ericsson is at second place with market share of 12%.


DISTRIBUTION IN TERMS OF UNITS


GROWTH RATE OF INDUSTRYINDUSTRY PROFILING – MOBILE INDUSTRY

PRESENT SCENARIO OF INDIAN MOBILE INDUSTRY

India constitutes approximately 10 percent of world wile sale of mobile devices. “Market is supported by global and local players as well.”

“Growing influence of local handset players in the low-end segment has forced high-end companies to sell phones at a discounted rate.”

Mobile device sales in India are forecast to reach 138.6 million in 2010, an increase of 18.5 percent over 2009 sales of 117 million units. The mobile handset market is expected to show steady growth through 2014 when end user sales surpass 206 million units.


Cellular phone penetration in India stood at 45 percent in 2009, and the market is entering into a second phase of growth, with replacement sales increasing from 45 percent in 2009 to 50 percent of total sales in 2010.

Sales of mobile has shown an aggregate increase of about 50 %.

Despite very high competition Mobile industry is growing at a very high pace.


LEVEL OF COMPETITION Global mobile manufacturing firms are facing tough

competition from local mobile manufacturing firms New entrants are using various techniques like- low

price, innovative products etc. to capture market share. Companies like Micromax, G-Five etc are using low price strategy to gain market share. These companies are offering products similar to products of other high-end companies but at much lower prices.

With the entry of low priced Indian mobile handset player like- Micromax, Lemon mobiles etc, focusing on value conscious consumers has intensified competition in the Indian mobile device market.


Due to this strategy, Micromax is now India’s third-largest GSM mobile phone vendors with a market share (in term of units sold) of 6 percent after Nokia (62 percent) and Samsung (8 percent).


MARKET STRUCTURE & SEGMENTATIONLow-end products

Low-end products have price band of approximately Rs.1000 to Rs.3000. This segment contributes to approximately 15% of total Indian mobile device market. The average selling price (ASP) of a mobile device is approximately $52, with 85 percent of devices sold costing below $100.These phones are generally meant for basic functions. These products are meant for people for whom cell phones are just another communication device.


Mid ranged productThese products have price band of Rs.3000

to Rs.10,000. Almost all companies offer products in this range. These types of products have various feature like- good music speakers and compatibility, good mobile camera and social networking application. These products are used by Mobirati Users, Paragmatic Adopters and Social Connectors

High-end products

High-end segment have price band of above Rs.10,000. Local player’s like- Lemon mobile, karbonn mobile etc don’t target this market. This segment constitute products like- smart phones, PDA and high-tech mobile handsets. Smartphone are the fastest growing market segment, registering over 50 per cent growth in 2010 over 2009. Smartphone sales are expected to grow 60 per cent in 2011 over 2010.


GOVERNMENT REGULATIONS & LEGAL ASPECTS In 1994 the government of India announced

National Telecom Policy which allowed private players to enter in the market of telephony in India but the policy was not friendly enough to attract the private companies for a longer duration.

Anti-Dumping DutyAnti dumping duty of up to 266 per cent was imposed on imports of IT equipment also used in the telecom sector to guard the domestic industry from cheap Chinese and Israeli shipments. The mobile industry was also suffering from the same in India due to cheap Chinese mobiles which disturbed the whole Indian mobile market especially rural. Anti- dumping duty made the price of the Chinese or Israeli mobiles comparable with the domestic players.


RECENT DEVELOPMENT & TECHNOLOGY

3G AuctionWith the auction of 3G spectrum in 2010, some of the telecom service provider companies are all set to launch their 3G services which has transformed the mobile industry. Mobile phone companies have launched their 3G compatible handsets to redefine the Indian mobile market. Bluetooth and Wi-Fi technologies enabled handsets were in the most demanded mobile phones and now the demand for 3G enabled handsets has also risen up.


RECENT MERGERS AND ACQUISITIONS

Activities in the industry

Idea, the countries fifth largest telecom service provider company, acquired Spice Telecom in 2008 and the deal consisted of 4 transactions.

It acquired the MODIs’ 40.8% stake in Spice (for Rs 2,720 crore).

It launched the mandatory 20% open offer for the Spice shareholders, jointly with Telekom Malaysia International (TMI).


The merger of Spice with itself and it offered a 14.99% stake to TMI through a preferential allotment.

The Idea-TM combine launched the open offer at Rs 77.30 jointly with TMI, which now holds 39.2%in Spice.

It was the fourth largest merger and acquisition deal involving an Indian entity in India

FOREIGN INVESTMENTS

India has become an extremely attractive market for Original Equipment Manufacturers (OEMs) in most segments of electronics production, with an estimated 11% of the global market share by 2015.

At the current growth rate, the Indian telecom equipment manufacturing sector is set to become one of the largest globally by 2020.

FOREIGN DIRECT INVESTMENT

6 KEY DRIVERS OF THE INDIAN MOBILE INDUSTRY Further cuts in regulatory costs (license fee, USO

fund contribution, ADC, etc) Infrastructure sharing to result in speedy rollouts

of networks and wider coverage Lower cost of equipment (with most of the global

equipment manufacturers setting up operations in India)

Low wireless penetration of about 22.5% compared to world average of 50%

Favorable demographics – rising young population coupled with growing middle-class to drive consumption power

Increasing affordability – low tariffs, easy payment plans and low priced handset

SWOT ANALYSIS

SWOT Positive Negative

InternalFactors

Strength• High technological

advancement• Large customer base• Increasing disposable

income of the people• Greater number of

Telecom service providers thus high demand of mobile phones

• Government policies to support the industry

Weakness• Highly Competitive• Intensive R&D required• Low end products yields very less

margin


External factors

Opportunity• Rural market is very less

penetrated so great opportunity ahead

• 3G auction has paved the way for highly sophisticated mobiles.

• I-pods, Smart-phones are highly demanded

• QWERTY keypad mobiles with various applications like GPA, Maps 3G features.

• Android compatible mobile phones.

• Microsoft office and pdf readers enabled phones.

• Government policies for mobile banking provides great opportunity ahead

Threats• Very lucrative industry, and

low barriers to enter in the industry

• Unorganized sector• Need to look for each social

class• Need to keep abreast with the

technology


KEY OPPORTUNITIES With fastest growing population in India, it

proves to be one of the largest market in the world. The telecommunication market is growing with tremendous pace which provides immense opportunities for mobile industry.

The present penetration of mobile industry in India is only about 43% which is highly contributed by urban market, thus rural market is yet to be tapped


PORTER 5 FORCES MODEL FOR MOBILE INDUSTRY Barriers to Entry

The mobile industry is free of barriers, and any organization can enter as long as it fulfills the general compliances of the government. Absence of any barrier in the mobile industry makes it highly competitive, where in the companies need to keep them attached with the customer to get the pie of the market


Threat of RivalryA segment is unattractive if it already contains numerous strong or aggressive competitors. Mobile industry in India has a number of strong competitors but it has a lot of opportunity to grow, with only 43% of the market penetrated yet. The companies which impose high threat to the young entrants are:NokiaG’ FiveSamsungLava

LGMicromaxVideoconFlyZTE

Threat of substitute productLow end mobile phones in India are highly substitutable. With people demanding more and more sophisticated mobile phones, the low end product in the industry are facing threats of substitution.


Threat of suppliers’ growing bargaining power

Threat of suppliers’ bargaining power is the ability of the supplier to raise prices or reduce quantity supplied. At the low end mobile segments, the suppliers have high bargaining power with low brand equity products. If high end products are taken into consideration then the suppliers bargaining

power is very low because the brand equity of the products that are available in this segment is very high.

Threat of Buyers’ growing bargaining powerThe companies are competing on price in India with growing companies in the industry. Thus, the buyers’ bargain power is becoming very high. The companies in the industry are also suffering due to unorganized sector, which is eating up their market share.


MARKET FORECAST WITH MACROECONMIC ASSUMPTIONS

At present, India with more than 700 million mobile subscribers is ranked number 2 in the world mobile market and it is expected that with in no time it will cross 1 billion mark with the present growth rate. The innovations in the field of telecom sector are preparing market for mobile industry as well.

The Mobile TV, Mobile commerce, 3G, PDAs are some of the examples that clearly show the bright future of the Mobile industry ahead


Mobile is always seen as a front runner in claiming India’s position in digital landscape. The mobile density in India is in upwards of 40 % with urban region having tele-density 50.3% and rural with only 28.2%, whereas Internet penetration continues to lag between 4-6%. Thus there is a huge scope to capture the rural market and urban market as well.


GROWTH OF MOBILE INDUSTRY

The graph below shows the growth in number of towers to support telecom services in India with 361000 towers in 2010 and is expected to grow by 20% pa. The increase in number of towers represent increase in the penetration of the telecom industry and hence the mobile industry in India.


Mobile internet usages are also on upheaval trend worldwide due to increasing sales of iPhone and other high end phones

Social networking site penetration is 68.5% reach with 130.1 average minutes per visitor and 13.0 visits per visitor. The intensity of penetration of social networking sites is expected to be more than 75% by 2015 which will raise the demands for mobile phones that can support these sites

India produce a large scope for mobile commerce with 91% of the transactions happening in India by the way of cash and cash continuing to be the most preferred payment mode for the common man in India-marked-to-market mobile applications will play a significant role in making m-commerce successful


INDIA, A HUB FOR EXPORTS

Nokia is exporting 30-40% of its annual production at the Sriperumbudur (Chennai) plant to countries in Southeast Asia, ie. Singapore, Thailand and Malaysia, and is planning to expand its exports to other continents.

LG’s manufacturing unit in the outskirts of Pune, Maharashtra exports mobiles to countries in the Middle East, Africa and Asia. The company has earmarked 10 million handsets from its unit in India.

India is geographically central to growing markets in the Middle East and Africa, making the time span from design-to-market shorter than if the mobiles were to be transported from Europe or other production zones.

An added advantage is that indirect labor costs in India are about the same as in China but direct labor costs are about 30% lower.

Mobile manufacturers plan to make India a hub for exporting mobiles to the Middle East, neighboring countries and Europe.

Foreign Direct investments has helped India to reveal its potential of becoming a global hub in the transnational production networks

Imports

India imports 8 million handsets every month. Import of unbranded Chinese handsets into

the country has increased 90 per cent to 38 million units in the current year against 20 million units in 2009-10 .

According to the Indian Cellular Association (ICA), the import of unbranded Chinese handsets has grown four-fold in three years from 5.5 million handsets in 2007-08 .

India has banned the import of mobile phones without a unique international mobile equipment identity (IMEI) number in 2009.

Mobile Brand Qty (Pcs) Total value INR

APPLE 769 18464395

BLACKBERRY 118373 1577076671

CHINESE 2758502 4030201341

FLY 40800 45683435

G-FIVE 233410 340843650

HTC 25409 506443202

KARBONN 54700 80146449

LAVA 146408 200038198

LEMON 123540 195411215

LG 286067 504828871

MICROMAX 656490 1131643904

NOKIA 538375 3276070731

SAMSUNG 1125238 3299353637

SONY ERICSSON

67043 570100309

GSM & CDMA Mobile Phone Importers Data

REFRENCES

Department of Telecom, India Telecom Regulatory Authority of India India-cellular Association Internet and Mobile Association of India Mobile Future Forward Indian Telecom Industry, Corporate Catalyst

India Spectrum Auction in India, IIMA www.siliconindia.com Voice and Data online, CIOL


Mobile industry

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