The price-war initiated by new operators, coupled with the aggressive marketing done by manufacturers, is driving the growth of the mobile handset market like never before.

The fixed wire line phones market in India is becoming stagnant as mobile telephony is growing in leaps and bounds. Consumers consider landline phones as traditional and outdated, and their level of involvement in the purchase decisions of fixed-line phones is rapidly falling. However, the fixed wireless phone segment has seen marginal growth and will spearhead the growth in the fixed phones market. The mobile handset market, by analogy, has seen tremendous growth over the years. Both the entry-level low-end phones and the high-end luxury segment are expected to grow in the coming year.

Market Musings

Despite the slowdown, the telecom sector in India has seen spectacular growth as one of the fastest growing markets in India. With the government actively pursuing the aim of increasing the country's tele-density the market is bound to see further growth.

In the fixed phones segment, the SOHO and the SMB customers as well as the untapped replacement market offer extensive growth potential for the feature rich phones including cordless and CLI phones. Further growth is expected to come from the export market in the near future driven by the demand coming from emerging economies.

The leading market players in fixed wire line phones segment are Bharti Teletech and National Panasonic. Bharti Teletech was the clear leader with more than 60 percent of the market. Its major customers were Tata Teleservices, HCL, Pantaloon, Coral Telecom, and India Today. National Panasonic enjoyed a market share of approximately 20 percent. The other players in the market were ITI, BPL, and Siemens among others. The total fixed wire-line phones market was held to be in excess of Rs. 400 crore in 2008-09. The fixed wireless phones market was led by LG followed by ITI, Axestel, Huawei, ZTE and other players. The market was estimated in excess of Rs. 800 crore in 2008–09.

The overall mobile handset market was held to be worth 105 million units in 2008 and is expected to show a 10 percent increase. GSM continues to rule the market with a share of more than 70 percent with CDMA taking up the remaining 30 percent. Nokia led the pack with more than 60 percent market under its control. It was followed by other players like Sony Ericsson, Samsung, Motorola, and LG among others. Mobile handset players have understood the varied requirements of different consumer segments and pander to these with differentiated offerings targeting different groups. which satisfy the customer's monetary constraints as well as aspirations. The Indian consumer is being perceived as a cautious customer who demands the latest features and applications in a sleek form factor without compromising on value-for-money. Mobile communications is seeing growth with manufacturers addressing the complete spectrum of consumer requirements- that starts with low-cost handsets and ends with premium, high-end- heavily accessorized product offerings.

Growth Drivers

For the fixed phones segment, the expected increase in the number of internet subscribers is a huge opportunity for fixed wire line phones market as well. The replacement market too is a potential area of growth as Indian customers explore various options of migrating for basic landline phones to cordless phones as well as wireless and wire line phones with more contemporary features. Operators like BSNL and MTNL have shifted their focus from basic phones to CLI phones. Another important growth driver is the availability of VFM cordless handsets in the market. The entry of major international players like Alcatel and Voxtel with their diversified range of offerings has also fueled the market. High-end cordless models can further stimulate growth in the industry.

The mobile handset market is driven by the growth in mobile telephony. COAI has recently revealed its projections for the growth in the number of mobile subscribers for the period 2009-2015. As per the projection, the mobile subscriber base is expected to reach close to 900 million by 2012. Even with the subscriber base of 900 million, the teledensity would be just 72.4 percent.

The price-war initiated by new operators, coupled with the aggressive marketing done by manufacturers, is driving the growth of the mobile handset market like never before. With the launch of 3G services, the market will see further growth. As phones become a one-stop access point for all kind of services, from basic telephony to more sophisticated data services to, the handset market will see phenomenal growth. Growing rural mobile telephony and entry of newer operators is another potent growth driver. As the economy enters the revival mode and consumer sentiment becomes more optimistic, mobile handset sales are also expected to pick up.

Technology Trends

If one looks at the technology trends there is a shift from basic phones to Caller Line Identification (CLI) and cordless phones segments. The exciting new range of features like polyphonic ringtones, FM radio, 2-way speakerphone, large screen displays, color screens etc., is a key driver for the growth of CLI segment.

In the cordless segment, the demand is for 2.4 GHz digital technology with an emphasis on additional features 3-way call conference, greater phone book memory, and preference for sleek and slim aesthetics. The cordless segment is growing by 20 percent. Players are also looking to tapping the two-line phone segment. There is a huge demand for phones with features akin to those in mobile phones. Manufacturers are increasingly taking this into consideration and coming up with fixed phones that contain features like SMS, picture messaging, Internet access etc. to improve the customer experience and encourage brand loyalty. In the mobile handsets market, manufacturers are integrating the state-of-the-art technologies from all over the world and the latest features into the instruments. The year 2008 saw the introduction of Touch-Screen technology, GPS, as well as dual-sim card technology being available in the market.

Policy Issues

If the auctions happen and 3G services are rolled out quickly, the market will receive a definite push. Players are also demanding reduction in taxes keeping in view the aim to increase penetration. Growth of the market is affected by cheaper Chinese products. The recent move by the DoT in ordering operators to discontinue their services to phones with invalid IMEI numbers was a positive step in this direction. However, with the DoT order in favor of consumers who are using handsets without valid International Mobile Equipment Identity (IMEI) numbers, the consumers can escape the inconvenience of having their services discontinued.